Housing Inventories Are Falling So Sellers Do Not Need To Make Concessions
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.