Buying or selling, the real estate market is back on track
Low interest rates for buyers, low inventory for sellers make for a balanced market
By Steve DiMattia
Resident Community News
After years of languishing in the basement, San Marco’s real estate market has moved back upstairs and flung open the doors and windows to welcome in the sunshine of recovery. The best news is that, at the moment, both buyers and sellers are living happily together under one roof.
“There’s some balance in the market right now because buyers are willing to pay a little more and sellers willing to settle for a little less than asking price to take advantage of the increased activity we’re seeing that has been brought about by low interest rates and low inventory,” said Linda McMorrow from Legends of Real Estate. “Interest rates are low, but rising, so those buyers who can lock into the current rates will be at an advantage. For sellers, the inventory is still low, so they are receiving multiple offers and we are seeing homes that have been on the market for a while now selling.”
The numbers from Multiple Listing Service, which tracks real estate transactions nationwide, bear her out: While there was a 15.9 percent decrease in average sales of houses compared to last year, and San Marco’s absorption rate – or the rate at which homes are selling in a specific area – is high at 9.3 months, sold properties are up 40 percent and pending sales rose 220 percent. Average days on market plummeted from 310 to 125.
“The absorption rate can be driven by the average sales price. Listings sold and pending sales are both up, so the absorption rate should change as the pending properties close,” explained Sheron Willson, broker/ manager at Prudential Network Realty, which led the 2012 San Marco market share. A balanced market has an absorption rate of six months, below favors sellers and above, buyers.
“It’s a good time to sell before everyone figures out there’s a lack of inventory,” noted Anne Rain, of Coldwell Banker Vanguard Realty. “This historic buyer’s market is rapidly slipping into a marketplace where supply is not keeping up with demand. This is good news for sellers. The scarcity of homes for sale and an abundance of buyers who want to take advantage of low interest rates have brought multiple offers back to the negotiating table. Rock bottom offers are being replaced with higher competitive offers. Slight pricing increases are being seen as a result.”
Willson emphasized the importance of acting quickly in a shifting marketplace.
“The best time to buy is when the market starts to turn. As this trend continues opportunities are narrowed and when a property is properly positioned in market, buyers are met by competition including multiple offers. It appears this is a consistent, healthy trend, not a spike or catastrophic movement in the market. Therefore it is a balance for both buyers and sellers to take advantage of this current market to make the move that they have been waiting for,” she said.
Low interest rates are strongly contributing to that balanced market – currently between 3.5 to 4 percent for a 30-year fixed mortgage. People are still getting a lot of house for their money because of these low rates, but all realtors agree that it is essential to act quickly.
“With interest rates so crazy low, now is a good time to start talking to lenders,” said Steve Light, vice president/managing broker with Watson Realty’s San Marco office. “But the reality in today’s market is that it’s a bidding war. We are seeing multiple offers for every property and inventory is getting snapped up. Buyers holding out for a ‘better deal’ stand the chance of missing out altogether.”
Mike Field, a Fairfax resident and mortgage banker, said that buyers with pre-approved loans increase their likelihood of winning those bidding wars. He also advised that buyers have three or four lines of credit, a good idea of their price range and the amount they can place on a down payment as well as the loan amount they can handle versus the amount for which they might qualify.
“Historically speaking, prices are still low, but they are starting to get bid up. It’s a good time to lock in the low rates,” Field suggested.
Light strongly concurred with the advantages of pre-approved loans.
“Buyers have to step in with a serious mindset and have all of their ducks in a row. If I’m a buyer, I’m going to go to lenders and get pre-approved for a loan before I get involved. This takes away any hesitation on the part of the seller,” Light said.
Anita Vining, Prudential’s top producer for San Marco, also cautioned that buyers in more historic areas might want to spend under what they can afford.
“If you don’t have expandable cash, buying a historic older home may not be the right purchase because you can probably anticipate some after sale repairs, upgrades and maintenance.”
Legends’ McMorrow encourages her clients to buy with location in mind.
“It’s better to have a house that may not be ‘perfect’ and may need some fixing up but is in a great location than it is to have the ‘perfect’ house in a poor location,” she advised.
Those buyers with limited resources or damaged credit might consider visiting a mortgage broker who has relationships with a variety of lenders.
“I marry ‘need’ to ‘supply’. Different lenders specialize in different niches of the market and credit scores and I can help people find the best deal for them,” said Alec Boriss, owner of Oak Street Financial in Riverside. “It’s a myth that it’s difficult to get a mortgage. Conventional, FHA, USDA and VA all offer viable options for those with decent credit and the ability to put down a 3.5 percent payment.”
On the seller’s side, Light recommended an appraisal, an inspection and hiring a staging company to accentuate the home’s positive aspects.
“How wonderful would it be if sellers did those things? An appraisal helps you price your home smart to sell it fast. An inspection and staging means you can showcase your home with confidence.”
In addition to low interest rates, realtors also cite decreased unemployment numbers and the resolution of the 2012 presidential election as reasons why the real estate market is recovering. As people slowly get back to work, more money is becoming available and regardless of political view, now that the elections are over there is more certainty moving
forward.
However, appraisals is one area that realtors feel is still lagging.
“The appraisers have not gotten on board with rising home values yet,” Light said. “It takes them about six months. It’s really up to realtors to make them aware of comparable prices in the area.” Short sales or foreclosures in an area can also lower appraisal figures so they are not reflective of current market value.
Regardless, veteran real estate agents mark this as a watershed time in their profession.
“It’s as good as I’ve seen for 20 years,” said Fred Miller, who founded the Fred Miller Group, along with his wife, Carol, in 1995. “We are a mid-sized company but we’ve sold 30 homes since January. That’s more than we’ve sold in any seven-week period for the past five years. We’re up 35 percent over last year. It’s not just us; all agencies are up.”
Jon Singleton, top seller in Watson’s Avondale/Ortega office, San Marco resident and past president of the San Marco Preservation Society, noted that those in the real estate business that made it through the recession are now armed with extensive tools to succeed.
“The realtors, appraisers, mortgage brokers and lenders that are left standing have all been ‘battle tested’ so they survived some difficult circumstances and are very capable,” he said.
Prudential’s Willson put it another way: “People that learned to dance in the rain are the ones who succeeded.”
A large part of sustaining that success involves marketing and the use of technology.
“Fast-paced, hi-tech marketing tools have become vital to real estate sales. Marketing over the next decade is going to make companies or break them,” Rain predicted. “We must compete not only in our community but also on the World Wide Web using social networking, nationally recognized branding and innovative tools to direct buyers from anywhere to our local homes.”
Beyond marketing, technology, interest rates or even the conditions of the market, all of the top realtors agreed that the key to successful transactions still rests in relationships.
“Those of us who did make it through the recession did so in part because we truly valued our customers and understood that, whether it’s a $20,000 home or an $8 million home, it’s a big deal to that buyer. When you do it wrong the results can be devastating but when you do it right the rewards are phenomenal,” Watson’s Singleton said.
Both buyers and sellers are poised in the current balanced market to reap many phenomenal rewards – as long as they act fast.
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