In the 1993 movie classic “Groundhog Day” we watched Bill Murray wake up at 6:00 AM every day only to find he was living the same day over and over again. As we turn the page on another year and look ahead at the 2018 real estate market I can’t help but feel a little bit like Murray.
It feels like we’ve been here before.
Heading into 2018 the big story is low inventory (the number of homes available for sale) followed up with low interest rates, lagging construction, rising prices, and a powerful economy. But we’ve seen this before. In fact, the only real difference between 2018 and each of the previous few years may be that our alarmingly low inventory is at it’s lowest point throughout this time period.
What are the BIG ideas for the 2018 market?
There is a lot going on in the market, but in an effort to keep things simple let’s take a look at just enough information to hold a conversation the next time your neighbor says they are thinking about selling their home…
- At year end there were only 991 homes active on the market in Dane County, down 38% from the 1,594 homes available just two years prior and the lowest total since we started tracking in 1997. For long term reference, at year end 2005 we had just over 4,000 homes active. The inventory problem is real.
- Rates are still fluctuating right around the 4% mark keeping home loans affordable. Low rates and a strong economy, combined with the influx of millennials into the market, are driving high numbers of sales.
- Despite low inventory, the 8,054 sales in Dane County throughout 2017 were just 31 away from breaking the previous record of 8,085 annual sales set in 2016.
- Median sales price in Dane County was up nearly 8% in 2017 when compared to 2016.
In other words, supply is low, demand is high and we have a long ways to go for either of those to see noticeable change. (see more stats here)
Advice For Buyers: It’s probably never been more important to have a highly qualified agent serving you as a buyer than it is today. With the speed of the market, along with the competitive nature of negotiations, you’ll want an agent on your side that is knowledgeable about the market, creative in drafting offers, and that has positive relationships with agents from numerous brokerages. Make sure your agent can connect you with the right professionals as well…sometimes getting the house simply means your agent connected you with the right mortgage lender.
You may need to be patient and accept the fact that you may not get an accepted offer on the first home you fall in love with. Understand that in many cases “winning” negotiations will mean getting an accepted offer and moving into the home, not beating the seller up for a lower price, closing costs, or other terms. The best homes will sell at or above asking price in most segments of the market, so if you aren’t prepared to come strong you may want to sit this year out.
If you are looking to buy this spring there will be great opportunities out there, but be prepared for what you’re walking into, it won’t be easy, it’s likely to be a little stressful at times, and you’ll likely need to move fast. At some point prices will stabilize, but after a number of years with solid appreciation we still believe that despite the competition this is still a very safe time to buy a home.
Advice For Sellers: Just because it’s a sellers market doesn’t mean you can slap a sign in your yard and call it a day. Now, as much as ever, it’s important to do things the right way. It’s true that you can probably sell your house pretty quickly by just getting it on the market, but the little things a top agent can bring to the table could add thousands of dollars in your pocket by increasing demand and drawing competitive offers.
It is also not the time to see if you can get someone to bite by overpricing your home. Buyers tend to focus on properties new to the market and a poor pricing strategy, cheap marketing plans, and lack of preparation could still cause buyers to pass on your property, leaving it to sit on the market longer than it should. These homes often sell for less than they should have, usually after unnecessary price reductions or lost negotiation power.
In fact, the sellers that are really winning in this market are taking all the right steps to effectively prepare their home for the market and then pricing right where they should be, or even slightly lower, to encourage buyers to make offers on day one.