Over the last couple of years, you’ve probably heard that the real estate market has been doing well. And while the real estate market has certainly seen an improvement since the recession, there’s more to the story than meets the eye. In fact, with recent changes, homes may be getting harder to sell. But before you can understand the solutions, it’s important to know what is causing the difficulty for sellers.
Surprisingly, factors such as increased home prices, rising interest rates, and student loan debt are all key factors in the real estate market. Currently, these three factors have become the trifecta in declining home sales. In fact, according to the National Association of Realtors, pending homes sales fell again in August 2018 and “have now decreased on an annual basis for eight straight months.”
Increased Home Prices
Since the recession, home prices have continued to rise. And in many areas of the country, those prices have risen beyond a reasonable rate. The dominant factor contributing to the rise has been the extreme inventory shortage. With these increased prices, many buyers are being priced out of markets or being priced out of their comfort zone.
Rising Interest Rates
2018 has seen several interest rate hikes. With each increase, it decreases a buyer’s buying power and subsequently hurts the seller as buyers’ pre-approval amounts decrease. In addition, some buyers are opting to delay purchasing due to the increased purchase price and interest rates. This removes many qualified buyers from the market making it more difficult for sellers.
Student Loan Debt
One of the largest contributing factors affecting the real estate market is the student loan crisis. Nationally, the cumulative student loan debt tops a trillion dollars. This is crucial because many millennials are delaying home ownership — or are being denied mortgage loans — due to their student loan debt. Thousands of wanna-be home buyers aren’t in the real estate market right now, and the ones that are trying to buy a house are discovering they can afford far less than they want.
So What Does This Mean For Sellers?
This shouldn’t discourage people from selling. In fact, it’s still considered a seller’s market; however, these factors are contributing to a small decline and increased days-on-market. As a seller, it’s important to know that there are steps you can take to help alleviate these problems when you sell your home.
- Be prepared to assist buyers with closing costs. Due to increased home prices, and especially due to student loan debt, many buyers struggle with coming up with the funds for a down payment plus closing costs. Buyers may ask sellers to contribute to the buyer’s closing costs. Discuss with your Realtor and banker how that will affect your bottom line, but know this appeals to many buyers struggling to get into a home.
- Price your home well. Using a licensed Realtor that is familiar not only with your city, but your specific neighborhood is critical in pricing a home right. Homes that are priced too high often times lead to longer days on the market and even price reductions. Price it well from the first day on the market to attract the most amount of buyers.
- Have your home in tip-top shape. For many buyers, it’s a monumental expense to purchase a home. For some, that may mean draining much of their savings. Some buyers may not want to purchase a home that needs repairs because they simply don’t have the funds to finance those repairs. Prior to listing your home, identify repairs that need to be done and have those completed before listing.
- Consider offering a home warranty to buyers. Offering a home warranty gives buyers the financial peace of mind about a property. For around $600, a seller can provide a one year home warranty that assists the buyers when systems malfunction or quit working.
By working with a licensed Realtor, sellers can easily navigate the current real estate market. Even though there are some hiccups for buyers, sellers can still reap the benefits of the current market. By being proactive and prepared, both sellers and buyers will find that they can reach the same end game: a successful closing day!