Over the past couple years, we’ve become accustomed to hearing that we’re in the midst of a seller’s market, suggesting that it’s not a buyer’s market. Frankly, we don’t like those terms as they suggest that if the market is good for sellers, then it’s not for buyers, and vice versa. The terms present an either-or situation, failing to acknowledge that inventory alone doesn’t determine the health of the market.
Good news for both buyers and sellers
Sometimes, like now, even when inventory’s low, the market can be good for both buyers and sellers.
How today’s market favors sellers
This is an easy one: low inventory means more buyers lining up to buy your home. And with more buyers than homes, sellers can get top dollar…and get it fast.
Year-over-year months-of-housing-supply are down 22 percent in Minnesota and down 10.3 percent in Wisconsin compared with this time last year. Not surprisingly, that decreased inventory has boosted prices higher in both states by 6.1 percent to a median price of $235,000 in Minnesota and $175,000 in Wisconsin.
How today’s market favors buyers
In 2019, we’re seeing two factors that increase buying power, giving would-be buyers more leverage in the market.
First, the labor market and low unemployment means more people have more income. First American Chief Economist Mark Fleming says household income growth has increased the average family’s home buyer power by $13,000 this year. Second, rates are dropping. The rate drop in January from 4.64 to 4.46 may seem small, but that boosted home-buying power by $7,500.
How sellers can take advantage of today’s market
So now, with tight inventory, we have consumers with increased buying power and too little to look at. It makes one ask, “Sellers, what are you waiting for?”
Actually, we know what they’re waiting for. Sellers are waiting to list their existing homes until they can find the one they wish to buy. And the ones they may wish to buy are not listed because those move-up buyers are waiting to find the one they wish to buy—and so on. It’s 2018 all over again.
The smart, savvy sellers arrange for and/or put up with alternative living arrangements if their home sells before they find the one they really want. They move in with parents or relatives temporarily or find a short-term rental. Not only does this prevent unnecessary delays with the sale of their current home, it also puts them in a stronger position when purchasing their next home in a competitive market. They’re able to make an offer that is not contingent on the sale of their current home and leap frog other contingent buyers. If you’re willing to put up with moving twice, it could be worth it.
This won’t lastExperts expect demand this spring to continue climbing as mortgage rates continue declining and as more millennial buyers enter the marketplace. We’ve seen this before: increasing demand means increasing prices, and a new cycle begins. We don’t know yet what that next cycle holds for home buyers and sellers, especially with many leading economists forecasting a recession coming late in 2020. So buyers and sellers would be smart to act now while the buyer and seller scales are relatively balanced.