Housing Inventories Are Falling So Sellers Do Not Need To Make Concessions
Wednesday, February 13
Although the housing recovery has
been gradual, the Buyer’s market has already turned to a Seller’s market in
many states. In my market of Atlanta,
this is definitely the case in many more parts of town than not. As inventories have shrunk, housing prices continue
to rise. Over the last six years of the
housing slump, Buyers have enjoyed many enticements and/or concessions from Sellers.
The rules of supply and demand apply and
when housing is in short supply, there is no reason to offer concessions to Buyers
as the shoe is now on the other foot. Taking
the concessions out the process simplifies matters for all parties.
One common concession was Sellers
paying a share of the closing costs, sometimes a significant amount of
money. Sometimes home warranties were
paid for. Sometimes it was HOA
fees. Sometimes it was repairs prior to
close assuming it was not a foreclosure.
And on and on the options went.
Not so much anymore!
According to the National
Association of Realtors, 60% of the sellers in 2012 offered concessions to
buyers. That is a large amount of Sales
with concessions. The expectation for
the first part of 2013 at least will be a smaller figure. In some states where the market already
changed to a Seller’s market, the concessions have all but stopped in some area
and Buyers are starting to forget about asking for them.
Homes are being snatched up so
quickly that many Buyers don’t even get a viewing before the good ones are
snapped up. By the time they go to look
at it, the deal is gone. This is the way
things are now that inventory is low and turnover goes through the roof. Buyers are now needing to make on the spot
decisions to make an offer if they manage to view a house and want it. Buyers must expect, on average, to pay close
to the asking price if not above. In one
county I am thinking of now, 10-30% over list price is now common in the
low-middle price points. Buyers should
not be expecting Sellers to foot bills for concessions in these areas! Also regulations introduced by the Federal
Housing Administration are limiting whatever assistance Buyers can get for closing
costs to 6% of the loan amount on a 90% loan to value mortgage. Before sometimes Sellers inflate the prices a
little bit to cover for any concessions but now with prices rising, they are
getting their price with extra anyway more and more often.
It remains to be seen how long
this will sustain in the market.
Springtime is usually the best time of activity to buy but with
inventory down, it could be 2007 all over again. Sellers will enjoy this ride as long as they
can however we hope it can be sustainable at realistic rates. In the meantime, for many Buyers it’s time to
just pay for what you get and let’s hope all the Buyers and Sellers in 2013 get
what they bargained for.