Low interest rates and insufficient housing inventory continue to fuel a robust sellers’ market, creating advantages for both buyers and sellers. While interest rates have gone up from the historically low rates we saw in 2021, they are still incredibly low, giving home buyers more purchasing power. Homeowners who have been considering selling their home should list now to enjoy peak leverage as eager buyers compete for limited homes and push sale prices higher.
In a sellers’ market, the demand for homes far exceeds the inventory available for sale.
Low inventory was already a concern before COVID-19. Now that more buyers have entered the market, the lack of homes for sale has become even more challenging. Total inventory of unsold existing homes at the end of February 2022 was up slightly to 870,000 – equivalent to 1.7 months of supply at the current monthly sales pace.
Many people – especially urban dwellers – are still looking for larger homes in less-densely populated areas that include more lifestyle amenities. These home seekers are ready and willing to buy, making now an opportune time for homeowners to hang a “For Sale” sign.
With low supply, sellers who list now are selling their homes fast. In any local market where the home is priced at the median sale price, those homes are selling quickly, especially in the first-time homebuyer segment and the trade-up buyer market.
Advantages of Selling Now
“If you can sell your home now, you should,” is the advice from seasoned real estate experts. When supply is low, you are going to get more money than you would in a more-balanced marketplace.
Agents report that fewer choices often result in faster time to closing, multiple offers and bidding wars, which also drive the sale price up. Stories abound of situations where listings went under contract within three to four days of listing after fielding multiple offers, all above asking.
Sellers are indeed reaping the benefits. The median existing-home price for all housing types for February 2022 was $357,300, up 15.0% from one year ago. This marks 120 consecutive months of year-over-year price increases, the longest-running streak on record.
What’s Driving Buyer Demand?
Accelerating the decision-making process for both buyers and sellers have been those historically low interest rates, which are now hovering around 4 percent for a 30-year, fixed-rate mortgage, depending upon the borrower’s credit score, down payment and other factors.
That means it’s never been a better time to be a seller. Sellers definitely have more equity in their homes. They are selling for the highest price right now, and if that seller is a move-up buyer, they are able to purchase their new home with the lowest interest rate of their lifetime.
When interest rates are low, they attract additional buyers in a couple of ways. First, those who were sitting on the fence are now more inclined to buy, and second, buyers who previously qualified for less now qualify for more – they get more house for their money.
It’s opening up a larger pool of buyers, so a seller might have more interest in their home and even experience bidding wars. Low interest rates benefit sellers in the same way they benefit buyers. Once they sell, they can purchase a new home at the same low interest rate and may qualify for more house.
How Sellers Can Score Top Dollar Quickly
Just because buyers are snapping up limited homes quickly, however, doesn’t mean a seller shouldn’t spend some time preparing their home for sale. Ironically, during COVID quarantine many people took advantage of the time to tackle neglected home projects, and to organize and remove clutter, giving them a jumpstart on the home-selling process.
Real estate professionals advise sellers to declutter and depersonalize their home. People want to be able to visualize their belongings in the space.
In the current market, buyers may be more forgiving about surface imperfections. You don’t necessarily have to paint the walls — just get out your Mr. Clean Magic Sponge and clean them. These buyers are not going to ask for a contingency for painting; they’re willing to call a contractor.
Staging is also important. Purchasing a home is an emotional decision. Especially now, this is not just where the buyer is going to live but where they may be working for the foreseeable future.
