I recently saw a real estate cartoon that was funny and sad, all at the same time, and it sarcastically captures the frustration that many home sellers feel in their desperation to get their homes sold. With so many people trapped in homes that have more mortgage than value, home sellers across the US are faced with an increase in competition from distressed properties and a decrease in buyer activity.
There have been quite a few articles from the big news services lately about the housing market, and some mention that the problem is primarily based upon liquidity issues stemming from the changes in the mortgage markets, but I believe these writers are missing the big picture.
We have a "chicken or the egg" problem in real estate. Historically, 2/3rds of our buyers have a home to sell before they buy (meaning they are not first time homebuyers). They take the equity from their home sale and apply it to the purchase of their new home, and this often times allows them to "move up" without seeing a significant increase in their monthly mortgage payment. But today's real estate market situation is creating havoc on this spiraling problem.
First of all, these home-sellers-to-be-homebuyers do not have equity in their homes. Home values have dropped below what they owe, so if they sell their homes right now, they either must bring money to closing (thereby having no down payment to purchase the next home) or they have to do a short sale, which would leave them without a financing option to immediately buy a new home.
Ultimately, this means that we most likely will continue to see sluggish homebuyer activity, because 2/3rds of them have a home to sell first! What comes first, the chicken or the egg? The market is limping along on investor activity, first-time homebuyer activity, and people relocating from another real estate market.
Some home sellers have made the mistake of pricing their homes based upon what "they need" to accomplish the move. Unfortunately for them, that's not how markets work. Buyers won't come in and pay higher-than-market prices when other choices are available. I have seen quite a few listings on the market that are grossly over-priced and have no chance of selling. These homeowners would be smarter to remove their homes from the market so that the apparent supply would decline. If nothing else, it would enhance stability in home values.
So What's A Home Seller To Do?
There are options for home sellers. A prudent homeowner who knows a move is imminent in the next few years should sit down and meet with an housing expert in their market area. There are some great "not so obvious" solutions for home sellers right now, and the best thing to do is review all of the options with somebody who has helped a lot of others in similar situations.
If you find that you MUST sell your home in the next few years, sell your home now and sell it fast. The highest values for homes in the next few years is right now, and if you choose to wait, you will get less money for your home. We have enough evidence from our market reports and the global monetary problems that suggest the rebound on this could be 5 years or greater. There is no wise 'wait til next year' solution!
A Targeted Home Selling Plan For Homeowners Who Cannot Wait 5 Years
We have created a new video showing an overview of our targeted marketing plan for home sellers. It answers a lot of questions on what needs to be done to get a home sold today, and it should help you know what to look for in a real estate agent if you decide to sell your home.
Joe Manausa, MBA is a 27 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.