Depending on where you live, you may have seen a steady increase in home prices over the past 18 months. While this has been an enjoyable ride, regarding the recovery, there are warning signs that we may be entering a cooling off period. Most sales, particularly in real estate, are based on supply, demand and affordability. With home prices continuing to rise at their current pace, we may be reaching a stage where it is too expensive to buy a house in many areas. Rates of appreciation are making it difficult for buyers to acquire a home.
In order for the real estate market to truly turn around, there needs to be equal growth between increased income, home prices and affordability. With so many Americans affected by the housing collapse, there is still plenty of apprehension to get in a monthly payment that may stretch them too thin. With home values and prices rising, coupled with an interest rate increase, the same house that homebuyers may have considered last year could be even further out of reach. This could be the breaking point that causes buyers to hold off on buying until they find something a little less expensive that they like.
It is always better to be ahead of a curve than behind it. This concept should be applied when it comes to selling your property. The end of the year is typically a difficult time to sell a home. Most buyers with families want to have their kids in school before the year starts and want to get in before the weather changes. Showing a house with leaves everywhere or in the cold makes even the nicest house slightly less appealing. As an investor, if you know this and can see warning signs about buyer confidence, you need to adjust your purchase price. It is never ideal to make less than you anticipated on a deal, but sometimes it is best to take what you can get and sell your house as fast as possible.
Nothing will cause you to lose money on a property more than pricing it too high. You may think you are just going to take a chance and see if there is any interest, but you are actually doing more damage than you know. Buyers and realtors make snap judgments on properties as soon as they hit the MLS. If you are priced too high to begin with, you may lose a buyer or realtor forever. By the time you get around to lowering your property to where it should be priced, you may have missed your buyer or agent that would have showed it if it was $20,000 less. Instead of hoping for a miracle buyer, if you price your property right, you will either get your property sold quicker or create a bidding war and get more than your list price anyway.
Every time you sell you need to think about what a buyer is looking for. Right now, with prices and interest rates creeping up, they may be looking for affordability. Knowing this, you need to tailor any rehab work or pricing towards this shift in the market. Sometimes in market cycles you have demand on your side and others you are at the mercy of the market. After a few years of rising values, buyers may be hard to come by for the next few months. Knowing this can give you a decided advantage when it comes time to sell.