Sep 13, 2013
The end of the sellers’ market is coming (and that’s OK)
13 Sep 2013
Posted by Andrew Kantor
Now is a good time to sell. Sounds backwards, right? Aren’t we supposed to repeat the “good time to buy” mantra?
The sellers’ market we’re in will soon be coming to a close. The pendulum will begin swinging back. No, that doesn’t mean that prices will plummet and we’ll be back to 2008 — just that we’re about to see a leveling off.
Follow the bouncing ball:
- The market collapsed (you may have read something about this). Prices plummeted, homeowners were underwater, dogs and cats were living together… you know the story.
- The government stepped in, stumbled around, pushed a lot of buttons, and the market began to recover. Interest rates were the lowest in history, so investors jumped in, buying properties left and right.
- As inventory was scooped up, prices began to rise. The “shadow inventory” of foreclosures never appeared as more than a trickle (and they weren’t priced that low, anyway).
- So inventory went to those investors, to first-time buyers helped by the government (or not), and to people who were simply able to take advantage of the low prices and low mortgage rates.
- Welcome to the recovery. Took long enough.
And here we are.
We went from one of the clearest buyers’ markets ever (that too few people could take advantage of, sadly), to today’s sellers’ market where inventory is tight and prices are going up. Cue the panic talk of a new housing bubble — at least by people who don’t understand that this is just the pendulum swinging back.
So what’s next? We can already see it happening.
And prices and home values go up, people who were underwater are finding themselves in positive territory. ["The number of mortgaged residential properties with negative equity fell more than five percentage points throughout the year’s second quarter, CoreLogic reported."]
W00t! Finally (they shout) we can sell and move to a bigger house, or a smaller one, or get divorced! [FNC reports that "housing demand by trade-up buyers is rising as the home equity available to these prospective buyers is improving."]
So they’re starting to enter the market — they’ve been waiting, putting up with too little space, too much space, or that annoying other person for a long time. ["More than 8 million homeowners are ‘resurfacing’" according to RealtyTrac.]
And what happens when supply increases? Anyone? You, in the back. That’s right: Prices drop.
But this time it won’t be the massive hit of the Great Recession. For one thing, there won’t be so many foreclosures and short sales dragging things down. ["US Foreclosure Starts Hit Lowest Level Since 2005"] This time it’s more natural — or as “natural” as economics can be. Prices have been rising, so sellers are going to enter… and that will push prices down. But in a good, or at least normal, way.
It’s happening. Just look for stories about “economists less worried about new housing bubble.” Oh, here’s one now, courtesy of DSnews:
Market indicators continue to point to an imminent slowdown in home price gains—further allaying fears of another housing bubble in the making, Capital Economic says.
Yep, prices will soon stop rising so fast as more people enter the market. ["Housing inventories increased in August ... offering the latest sign that more sellers are testing the market after swift home-price gains over the past year." --WSJ] Then the cycle will repeat itself as it always has: Buyers will buy, inventory will decrease, prices will rise, and so on. Hopefully, though, we’ll have the normal, natural rise and fall — the kind we’ve seen for most of the past 100+ years — instead of another bubble.
Which brings us back to the original point: It’s a good time to sell because prices will soon be leveling off as we enter the “more of a buyer’s market” phase. And then we can get back to our normal mantra.