Demand for housing is white-hot and supply is ultra-lean. But that doesn’t mean all the people on one side of the real estate transaction are sitting pretty.
Across the country, many sellers are reluctant to list their homes for fear of not being able to find anything to buy. That keeps inventory tight, making the problem worse. In such a lopsided market, sellers, and their agents, need to hustle just as much as buyers do.
For Linda Gaudin, a divorced Portland, Oregon, homemaker whose kids had moved out, there were a few false starts. Gaudin started thinking about selling her big, old English Tudor in 2014 — “it’s 4,000 square feet and it’s just me and the dog,” she said — but shied away from the craziness of the real estate market.
Finally, after Christmas 2015, Gaudin had enough. “It’s time to quit taking care of this house,” she said.
Gaudin was “horrified” at the thought of putting her house on the market and having to rent while she searched for another. So when she listed, she made the deal contingent on being able to rent the house back from the new owners for 45 days. She had an accepted offer in nine days.
The National Association of Realtors, which tracks inventory of previously-owned homes, said there were 2.15 million such units available in May, about 24% lower than the average over the past ten years even as demand pent-up during the recession and early years of the recovery are pushing buyers into the market in droves.
Properties stayed on the market for an average of 32 days in May, NAR said, the lowest since it began tracking that measure in 2011.
Real estate brokerage Redfin surveyed sellers in May and found most said sellers have all the power or more power than buyers. Yet the biggest concern about selling, shared by 37% of respondents, was “I might not find another home I want,” followed by “I might not find another home I can afford.”
Redfin agent Blakely Minton, who works with sellers in Philadelphia, said some of her clients are making deals contingent on a longer closing period, renting back, or even applying for bridge loans or other creative financing options.
Homeowners out shopping for their next property can make offers contingent on successfully selling their own home, but that “weakens your offer in a bidding war,” Minton pointed out.
Minton sees a lot of seller hubris, and what she calls a sense of “I have other people dying to get in” to their home. “Gone are the days when you put in an offer and you meet in the middle.”
For some would-be sellers, the concern about finding the right property to move into has them considering staying put instead.
“We don’t want to settle on a place because we sell too fast,” said Erin Hamilton, who lives in South St. Paul, Minn. She and her husband are actively looking at home listings, but are also considering a remodel to fix what they don’t like about their current home. Homeowners in the same boat are flocking to more, and bigger, home equity lines of credit to make repairs.
But that’s not an easy decision, either. “We are afraid we will put too much money in and not get the return,” Hamilton said. “It’s a matter of doing all the math to see if it’s even the right decision to move.”
Quick moving markets can also pose a challenge for new-home buyers, like Bruce Dodge, who built a new home in Tucson, Ariz., about 10 miles away from where he currently lives. “We knew we had to sell it before we moved into the new house. You don’t want to put it on too early or too late, and not sell it on time,” he said.
Although his real-estate agent told him to wait until early June to list the home, they were anxious and decided to list in the middle of May. After 13 showings in 9 days, they had an offer. Luckily, the buyer agreed to rent back the home to them for an additional month so he, his wife and two children have a place to live until their new home is completed.
“In retrospect, we should have waited the month,” Dodge said, and he regrets not following the advice of his agent. His advice for people in his shoes: “Listen to the experts.”
Gaudin has gone from being put off by the churning Portland real estate market to taking solace in it. Her new home is in a part of town she’s not as familiar with, but her real-estate agent told her not to worry. “Joan says, if I decide I don’t like Lake Oswego I could turn around and sell that house for a profit.”