Low Rates Are About to End – How to Capitalize For Both Buyers & Sellers?

Low Rates Are About to End – How to Capitalize For Both Buyers & Sellers?

Last week the Fed Chairmen (Janet Yellen) came out and hinted that the fed will start to allow interest rates to rise.  Right now they are artificially suppressing rates to stimulate the economy.  Now that the economy has strengthened, they are now starting to focused on suppressing inflation. One of the major tools in doing that is raising interest rates.

This begs the question: “how can I capitalize now with interest rates low?” I outlined a game plan below for both buyers and sellers.

The Buyer Strategy: in zeroing in on a home, buyers need to start with patience. Sit down with a REALTOR® and get pre-qualified to purchase.  Your REALTOR® will be able to give you a referral to a lender who is best suited to your type of application and area you intend to purchase.

Next, with the help of your REALTOR®, get to know the logistics of the area that you are looking at. The price range, neighborhood, the local inventory, and local demand all establish how quickly homes are selling. For example, most homes priced above $1 million are taking a bit longer to sell than homes in lower ranges. In contrast, homes priced between $500,000 and $750,000 are selling very quickly; multiple offers are the norm and prices are on the rise.

As a buyer, after isolating a home that you would like to pursue and write an offer, establish the price you are willing to pay. Take a look at all of the most recent comparable and pending sales while carefully considering the condition, location, and upgrades in the home. Do not rely on stale data that is too old. Buyers that want to see comparable sales from 2014 are fooling themselves. With current prices rising, comparable sales that date back months are just not applicable. From August 2014 through January of this year, sales were flat and homes were not really appreciating. From February on, supply remained flat as demand climbed sharply, tipping Orange County housing into seller’s market territory with a return to appreciation.

The hotter the price range and market, the sharper a buyer’s pencil needs to be. Do not be afraid to pay a little bit more than the most recent comparable sale. That’s what occurs in a seller’s market that is fetching multiple offers on homes that are priced well and in great condition. With many buyers competing for the same property, remember that only one buyer is able to successfully purchase the home… and that new higher sale price will quickly be known by sellers of similar properties.  It is better to pay a little more for the first home you offer on as a buyer, than pay a little more a month or two later for the 4th home you offer on because each sale in-between will raise the price of the next home.

Pursue homes based upon the facts: recent comparable sales, the temperature of the local market, condition, location, upgrades, and what you are willing to pay… ultimately the price should be in alignment with your budget and monthly payment comfort level.  In the end, one year from now, successful buyers will be comfortably making the monthly payment and will not really care too much about the price paid for their home.

The Seller Strategy: this is the time of the year that a lot of homeowners come on the market and add to the competition. To properly capitalize on the current, hotter market sellers must not, under any circumstances, fall into the number one trap that plagues Orange County real estate even today: grossly overpricing their homes. There are way too many overpriced, overzealous sellers, even in the current market. A staggering 8.5% of all active listings reduced their asking price each week right now. That’s a lot of price reductions.

What is at the root of this overzealous thinking? Sellers would not have to reduce their asking price if they properly did their homework prior to selecting the initial list price. Carefully arriving at price is fundamental in achieving success. It is imperative that the price is based upon the cold hard facts, the most recent comparable and pending sales. This will establish the Fair Market Value of a home. Since we are experiencing appreciation, this value for the typical Orange County home is a few thousand dollars more than the most recent comparable sale. But, it is NOT tens of thousands more.  When a home is initially priced “enticingly”, serious buyers feel an sense of urgency and write offers (good offers) right away because homes which are priced right a “gone” quickly.

Sellers also need to carefully consider their location, condition, and upgrades. Some homes sit on the market for longer with plenty of showings but no offers. They may be priced close to the most recent comparable sale, but there is a reason they are not having success. There is always an underlying reason for a lack of success… and it must have been overlooked when establishing the initial list price.  Perhaps the home backs to a busy road, the home needs a lot of work, or there are very few upgrades.  Usually the buyers & showing agents will volunteer the reason why a home is not selling.   Then it is up-too the seller to address/fix/repair the issue or simply reduce the asking price to compensate.  But, make no mistake, lots of showings with no offers means something must be done, and done quickly to get top dollar for the home before it becomes a “stale listing”.

For both buyers and sellers, carefully arriving at the proper game plan in approaching the housing market is the difference in success and frustration.  Now is a great time for all type of market participants:  first time buyers, move up/down buyers, investors, and homeowners who are ready to “cash-out”.

Are you interested in either buying or selling?  Or do you know someone who is?  Please contact me ASAP so I can begin to help with any of your Huntington Beach Real Estate or Costa Mesa needs! Thank you!

Malakai Sparks
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