I get questions like this a lot. Why isn’t inventory picking up more? Aren’t home prices coming down? Where are the sellers now? In short, sellers are just as unsure about what to sell a house for as buyers are unsure about affording one. For this reason, and others, sellers continue to retreat from the housing market. Many will blame the interest rate hikes from “the Fed”. But the reality is, “the Fed” doesn’t set the interest rates on mortgages. Here’s a quick explanation on Forbes.com about what it means when “the Fed” adjusts the general borrowing cost of money. But to keep it simple, the cost for lenders (e.g. a bank) to borrow money to create loans (for both business and consumer borrowing) is what goes up. The banks then pass this cost to the consumer. Again, way oversimplifying it.
Sellers and Buyers are Backing Off
In terms of housing, the cost of money has pushed mortgage rates up dramatically in a very short period of time. And this did slow down the rush to purchase homes. Buyers went from a subtle pause to a big hesitation and now – just a full retreat to the sidelines. And this is what is unfortunate. Because it feels like demand has softened, sellers are now questioning the ability to sell their property. At least the way houses were selling in 2020-2022. What we are entering into is more of a balanced market, but it still will heavily favor sellers. Especially sellers of well maintained, updated or even fully renovated homes. In short. the housing inventory problem has not retreated like buyers. We simply cannot build (or renovate) enough homes fast enough to meet the demand of buyers.
What is the Home Value?
That is the number one question on everyone’s mind. So what is a home worth now? Well, it is worth whatever a buyer is willing to pay for it. Home values are subjective and good agents know how to read their market and provide the best counsel for setting a home sales price. But it can feel like a game of chicken. Buyers waiting and expecting sellers to buckle under the pressure of “days on market”. Sellers see that there is little competition for their home. And, for those who can afford to wait, they are likely to see a list or just below list price offer. Ultimately, the home value is set by buyers. If everyone stopped purchasing and demand disappeared – sellers would lower prices to bring buyers back. But in housing, it is basically impossible to just shutdown all home sales. So if that’s the case, then where are the sellers?
Sellers Retreat from the Housing Market
Unfortunately, most sellers are not well informed. They assume the value of their home rather than talking to a real estate agent to determine that value. A lot of this is because real estate agents are sales people. The job of an agent to create a transaction. A sale. And because agents are paid on commission only, the pressure for sales (listing a home or representing a buyer) is high. And for many agents, they have the added pressure of paying a ton of fees and dues for their license, advertising, insurance and brokerage. Homeowners avoid the high pressure tactics used by some agents. Hell, I know of agents who will call homeowners 3-5 times in an hour just to get a listing appointment. Mix in the high pressure tactics of some (not all) agents with a market uncertainty about home value and you get sellers pulling to the wayside. This pressure to list a house mixed with the uncertainty of the economy has sellers in full retreat from the housing market.
What about Buyers Ability to Purchase?
And this is the added reason why people are asking “where have the sellers gone”? Just as buyers are watching mortgage rates and borrowing costs, so are the sellers. And sellers see the same news headlines about “home sales are falling to lows not seen in decades” which only adds to the anxiety of the sale. Buyers have to meet lending criteria and now there is the added (increased) cost of the purchase. For many buyers, purchasing power has dropped significantly. Buyers are pushed out of their desired purchase range into a lower range that may not have the inventory or caliber of homes they desire.
Options for Sellers
GLG Homes is a Connecticut based real estate investment and renovations company. Simply put, we buy houses. We make the improvements needed and then sell (or rent) the house. For sellers, we promise to eliminate the anxiety of being able to sell the home. No inspection contingencies. We can even assist with closing costs in some cases. For sellers who don’t have a mortgage, but the house needs repairs and updating, we can allow seller (owner) financing and this allows us to pay more than a cash offer. Above all, we simplify the process. Our attorneys ensure that all transactions are properly conducted and recorded. For some, depending on a property owner’s timeline and readiness, we can close in as little as two weeks. But if an off market sale is not a fit, we can introduce the owner to our network of professional real estate agents who do not practice the “hard sale” approach.
Want to see if we are a fit for you? Give us a call (203) 486-8868 or email me at [email protected].