After experiencing a swift v-shaped recovery in the real estate market earlier this year, there are few signs that home pricing will ease up in the near-term. Nationally and locally, home prices are up 12% year-over-year, construction material prices have increased significantly, and housing inventory shortages are prevalent. Combine these factors with the significant amount of home buyers who are moving into PA from other local states, and you have the perfect storm for continued home price increases. It’s a great time to be a seller. The flip side of the equation is that buyers may need to adjust expectations.
Sellers, if you're even pondering the potential of selling, let's run through the various scenarios this market is presenting.
Undeniably it's a great time to sell. Low mortgage interest rates, low inventory and an abundance of buyers moving to PA from neighboring states is resulting in strong competitive offers on homes. Financially strong buyers are making offers that include waiving inspections and waiving appraisals. Across five of the local counties, 16% - 21% of offers are all-cash. (County stats are listed at the end of this article.) Concerns that made buyers pause in the past – such as homes on busy roads, cosmetic updates, and older mechanicals – are not as much of a showstopper these days. Buyers just want to lock in now and settle down, especially before interest rates rise.
If you're selling and buying at the same time, here are some things to think about so that your transition is smoother. If you need the funds from the sale of your current home to purchase your next home you'll require a home sale contingency in your purchase agreement of sale. Since most sellers have multiple offers to choose from, it's unlikely that sellers will accept an offer that requires them to wait for your current home to settle. (If your home doesn't settle, the sellers will need to go back on the market which may dampen their home's appeal.)
Some strategies for sellers (who are also buyers) to remain competitive during this time:
Obtain a bridge loan that allows you to remove the home sale contingency by tapping into the equity in your existing home.
Sell your current home and move in with family or friends temporarily.
Sell your current home and rent an apartment or home in the interim until you find your next home.
If you're a buyer in this market - buckle up. It's bumpy out there. Though cash will always be king, the majority of purchases in the local five counties have been made with conventional financing. (See breakdown of financing by county below). With most homes receiving 5 to 26+ offers, it's critical to put your best financial foot forward. When up against conventional financing we're seeing very few FHA, VA, USDA, and other forms of financing being accepted
Some strategies for buyers to remain competitive during this time:
- Look for homes that may have been originally overpriced for their condition. With longer days on market, most sellers are more willing to strike a deal.
- Look for homes outside of the typical local hotspots. In our region, school districts drive desirability. Consider looking for homes that aren't in the most desirable school districts.
- Look for homes that are 10% below your maximum budget. This will give you room to be competitive.
- If waiving inspections makes you uneasy, consider offering to limit how much you will negotiate after inspections, or cap repairs to material defects. (For example, don't haggle over missing GFCI outlets in the kitchen when you can easily handle this after settlement.)
- Waive inspection repairs on specific items like the roof or electrical if you have a family member who can handle either of these repairs cost-effectively post-settlement.
- Be creative about concessions. If the seller is elderly and the house has an abundance of items to be removed prior to closing, let the seller know it's ok to leave whatever they wish, and you'll clean the house out post-settlement.
Whether you're selling, buying, or selling + buying, having a skilled Realtor® on your side will stack the odds in your favor for a smooth real estate experience. Call me anytime to strategize: 484.459.6966
Be well my friends!
Melissa Walter, CRS, ABR, SFR, REALTOR®
Compass RE / 6 E Montgomery Ave, Unit 105 / Ardmore PA, 19003
Serving Montgomery, Bucks, Chester, Delaware, and Philadelphia Counties
HOME PURCHASE FINANCING BREAKDOWN BY COUNTY
(previous 90 day closed sales, Aug 15-Nov 15)
Cash: 466 sales (18%)
Conventional: 1795 sales (68%)
Other*: 361 sales (14%)
2622 total sales
Cash: 619 sales (17%)
Conventional: 2477 sales (70%)
Other*: 452 sales (13%)
3548 total sales
Cash: 380 sales (16%)
Conventional: 1808 sales (74%)
Other*: 248 sales (10%)
2436 total sales
Cash: 436 sales (19%)
Conventional: 1378 sales (61%)
Other*: 445 sales (20%)
2259 total sales
Cash: 1031 sales (21%)
Conventional: 2877 sales (58%)
Other*: 1046 sales (21%)
4954 total sales
*Other financing may include FHA, VA, PRIVATE, USDA, and/or COMMERCIAL WRAP financing