It’s understandable that sellers who have the luxury of waiting might want to sit out 2020 with the hope that things will improve by next spring . . . but is that the right approach?
While no one knows exactly what lies ahead, there are some very good reasons why most sellers should forge ahead with their plans right now. Here are some things to consider:
- Buyer demand is still strong, and millennials are leading the way. With the experience-based economy in retreat, millennials are more likely to want to spend their money on a home. A recent survey revealed a new housing demand — led by millennials — of 2.1 million households as a direct result of COVID-19. But millennials aren’t the only buyers out there. Just as lockdown has given way to ‘covidivorces,’ for many it’s led to a growing dissatisfaction with their homes and subsequent wish to move. Suddenly, high-rise living feels crowded and unsafe and homes that now have to accommodate offices, gyms and classrooms are feeling cramped.
- Price point matters. To help your sellers make an informed decision, it’s important to be upfront about what’s moving. While it’s true that inventory is low — creating a seller’s market in most cases — demand for homes in the luxury sector has stalled for several reasons. Buyers at higher price points might be waiting for stocks to recover, and they might also have trouble securing a jumbo loan. Since Fannie Mae and Freddie Mac don’t secure those mortgages, they carry a higher risk for lenders. According to the Mortgage Credit Availability Index, mortgage credit availability fell by 3.1% in May, meaning lending standards are tightening. With less qualified buyers out there in the market for high-end homes, price drops may be necessary.
- Waiting might mean less money. According to the most recent CoreLogic Home Price Index, home prices were up in April, reaching their highest annual growth rate since August 2018. But that’s expected to change, since real estate values are a lagging indicator of market shocks. CoreLogic is now projecting the first decline in values in nine years to begin in 2021. Sellers who wait to list might just see their home values decline as the housing market absorbs the shock of a recession and severe job losses across the country. And that’s going to take some time. At a recent news conference, Federal Reserve Chair Jerome Powell said the Fed is projecting the unemployment to fall to 9.3% by the end of 2020, but doesn’t expect a full economic recovery until 2023.
It may not feel like the perfect time to sell, but we may look back at 2020 and realize that it actually was. “Demand for single-family homes at the mid-price and below looks to be exceptionally strong,” said National Association of Realtors Chief Economist Lawrence Yun in a recent video. “Given the shortage of inventory, members should expect that there could be multiple bidding of mid-priced and lower tier properties. So, for sellers, it is a great time to list. Most likely, they will attain a price that is close to pre-pandemic home prices, if not higher.”