news about reviving housing market is all over the national and local
newpapers, televisions, radios, and even your daily conservations with
your coworkers, friends and family members. You may be one of the people
who have been saving the money for a turn of the market. The reviving
market news is pumping up your energy to start looking and get ready to
make offers. BUT as you meditate at night, you clam down and start
wondering: "Every body is talking about the bright future of the housing market. Is it really so?" Yes!!
The housing price has hit the bottom. One one hand, we see the median
sales price jump up 5% in King County last month (view Graph 1). Based
on my team of realtors in Seattle, we know for sure the median sales
price of March 2013 will go even higher. On the other hand, the numbers
of pending listings and active listings are closer than every before (view Graph 2). In other words, the inventory is depleted. Well-priced properties are sold on the same day they are listed.
However, the future is not all that positive. At least it is not for home buyers.
There are many obstables that buyers in today's market are facing. If
you are preparing to buy, you should know about the following obstacles. Buyer's Obstacle #1: LOW INVENTORY
the demand is up along with the housing recovery, the supply is falling far
behind. (See Graph 3). There are many reasons contributing to the low inventories we
face in many metropolitan areas nationwide. They include the
lack of new constructions and sellers' expectation of market recover. With low inverntory, buyers are like fishes that try to swim through a small hole to get to a
better pond. The majority of these fishes will not succeed at their
first few attempts. Buyers, shopping with a few houses, have the same difficulty. The majority
of them will not succeed at their first few offers. They will graduately
realize the market condition after a few offer attempts. By the time
they make a successful offer, the median sales price in the area they are looking for may have gone up a few points. Buyer'sÂ ObstacleÂ #2: LOWER DAYS ON MARKET (DOM)
The DOM has gone down significantly since last year. An analysis shows the DOM of pending listings in North Seattle in the month of March 2013 (see Graph 4).
1.7% of pending listings are sold on the same day it is listed.
15.4% of pending listings are sold within 3 days.
55.4% of pending listings are sold within the first week.
How do people respond to this market condition? Some people, who are not aware of the market condition, think they can wait till they have time to view a property. They expect that the properties are still there when they are ready to see it. Others, who are aware of the market condition but don't understand the impact, think they can re-visit a property before they make an offer. Nonetheless, successful buyers are people who have been watching the market for a while. These buyers work with realtors to catch the newest listings and walk through a property the very first day it is on market. They are pre-approved and ready to make the best offer. These are the people who are "ready, willing, and able" to buy in Today's Market.Â
Buyer'sÂ ObstacleÂ #3: MULTIPLE COMPETING OFFERS On average, listing agents are receiving 4 to 7 offers in today's market. The offer price can come up more than 20% of the listing price, that is, $15,000 for a $300,000 house. You may think that is insane. Hear this!! Less than a week ago, I made an offer on a property in SeaTac.By 8 pm the very next day after it was listed, there were 51 offers submitted. On the day after, I was told that the sellers pick 9 offers among the 51 to make their best offers. My second offer was rejected. The final offer that was accepted was about twice of the listing price. Insanity!!?? This may be an extreme real life example, but buyers should not underestimate the effect of multiple offers.
Buyer'sÂ ObstacleÂ #4: BUYERS' REGRETS Facing low inventory, lower days on market, and multiple offers, buyers often feel rushed to make a quick decision.Frequently, they make offers on the same day they view the properties. Many of these last-minute offers are at prices above the listing price. They lose the chance to "sleep on it" and discuss with their family members and co-workers. They are not mentally prepared to make the decision and offer more than the listing price. When they realize that, they want to get out of the deal. If they are still within contigency periods, they get out with contigencies and retrieve the earnest money. If they are unlucky and do not realize it till the inspection report is done, they may have to lose the earnest money to compensate the sellers.
When the market is booming again (as it will be in the following months), the buying pressure is going high. There is no quick solution to low inventory. We may still see buyer's tension in seller's market for several months. Many people will either ignore the market condition or make unrational quick decisions. These buyers are the victims of today's fast-paced market. Become aware of these obstacles. Avoid putting yourself in an unprepared purchase. And good luck with house shopping.Â Â
Graph 1: 2012 to 2013 Median Sales Price of Residential Properties and Condos in King County. Graph 2. The Numbers of Total Active Listings versus Total Sold Listings in Seattle. Graph 3. 2012 to 2013 Listing Inventory of Residential Properties and Condos in King County. Graph 4. Days on Market Analysis of March 2013 Pending Listings