The Number One Mistake Sellers Are Making: Overpricing Their House

In today’s housing market, many sellers are making a critical mistake: overpricing their houses. This common error can lead to a home sitting on the market for a long time without any offers. And when that happens, the homeowner may have to drop their asking price to try to re-ignite buyer interest. Data from Realtor.com shows the number of homeowners realizing this mistake and doing a price reduction is climbing (see graph below): If you’re thinking about making a move yourself, here’s what you need to know. The best way to avoid making a costly mistake is to work with a trusted real estate agent to find the right price. Here’s a look at what’s at stake if you don’t. Not Paying Attention To Current Market Conditions Understanding current market conditions is key to accurate pricing. You don’t want to set your asking price based on what happened during the pandemic. The market has moderated a lot since then, so it’s far better to align your price with today’s reality. Real estate agents stay updated on market trends and how they impact the pricing strategy for your house. Pricing It Based on What You Want To Make (Not What It’s Worth) Another misstep is pricing it based on what you want to make on the sale, and not necessarily current market value. You may see other homes in your neighborhood selling for top dollar and assume yours can do the same. But you may not be considering differences in size, condition, and features. For example, maybe that other house is waterfront or has a finished basement. To sum it up, Bankrate explains: “How do you find that sweet spot of pricing for profit but not overpricing? The expertise of your agent can be truly valuable here. A knowledgeable agent will understand fair market value in your area, how much your house is worth and how much you might reasonably expect to get for it in the current market.” An agent will do a comparative market analysis (CMA) to make sure your house is compared with truly similar properties to get an accurate look at how it should be priced. Pricing High to Leave Room for Negotiation Another common, yet misguided strategy is to price your house high on purpose, so you have more room to negotiate down during the sale. But this can backfire. A price that seems too high often deters potential buyers from even considering the home. So rather than leaving room for negotiation, what you’ll actually be doing is turning buyers away. U.S. News Real Estate explains: “You want to sell your house for top dollar, but be realistic about the value of the property and how buyers will see it. If you’ve overpriced your home, chances are you’ll eventually need to lower the number, but the peak period of activity that a new listing experiences is already gone.” An agent can help you set a fair price that attracts buyers and encourages more competitive offers. Bottom Line Overpricing your home can have serious consequences. A knowledgeable real estate agent brings an objective perspective, in-depth market knowledge, and a strategic approach to pricing. Connect with us to avoid making a pricing mistake that’ll cost you.

Is Affordability Starting To Improve?

Over the past couple of years, a lot of people have had a hard time buying a home. And while affordability is still tight, there are signs it’s getting a little better and might keep improving throughout the rest of the year. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says: “Housing affordability is improving ever so modestly, but it is moving in the right direction.” Here’s a look at the latest data on the three biggest factors affecting home affordability: mortgage rates, home prices, and wages.  1. Mortgage Rates Mortgage rates have been volatile this year, bouncing around from the mid-6% to low 7% range. But there’s some good news. Data from Freddie Mac shows rates have been trending down overall since May (see graph below): Mortgage rates have improved lately in part because of recent economic, employment, and inflation data. Moving forward, some rate volatility is to be expected. But if future economic data continues to show signs of cooling, experts say mortgage rates could keep going down.  Even a small drop can help you out. When rates decline, it’s easier to afford the home you want because your monthly payment will be lower. Just don’t expect them to go back down to 3%. 2. Home Prices The second big thing to think about is home prices. Nationally, they’re still going up this year, but not as fast as they did a couple of years ago. The graph below uses home price data from Case-Shiller to illustrate that point: If you’re thinking about buying a home, slower price growth is good news. Home prices went up a lot during the pandemic, making it hard for many people to buy. Now, with prices rising more slowly, buying a home may feel less out of reach. As Odeta Kushi, Deputy Chief Economist at First American, says:  “While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help – so the dream of homeownership isn’t boarded up just yet.” 3. Wages Another factor helping with affordability is rising wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have increased over time: Look at the blue dotted line. It shows how wages usually go up in a typical year. On the right side of the graph, you’ll see wages are rising even faster than normal right now – that’s the green line. This helps you because if your income increases, it’s easier to afford a home. That’s because you won’t have to spend as much of your paycheck on your monthly mortgage payment. Bottom Line When you put all these factors together, you see mortgage rates are trending down, home prices are rising more slowly, and wages are going up faster than usual. Though affordability is still a challenge, these trends are early signs things might be starting to improve.

The Great Wealth Transfer: A New Era of Opportunity

In recent years, there’s been a significant shift in how wealth is distributed among generations. It’s called the Great Wealth Transfer. Historically, the transfer of wealth from one generation to the next was a more gradual process, often limited to smaller amounts of inheritance or family savings. But today, the scale has increased in a big way. As a recent article from Bankrate says: “The biggest wave of wealth in history is about to pass from Baby Boomers over the next 20 years, and it’s going to have major impacts on many facets of life. Called The Great Wealth Transfer, $84 trillion is poised to move from older Americans to Gen X and millennials. If it’s managed smartly, Americans will be able to grow their wealth and ensure their financial security.” Basically, as more Baby Boomers retire, sell businesses, or downsize their homes, more substantial assets are being passed down to younger generations. And this creates a powerful ripple effect that’ll continue over the next few decades. The graph below uses data from Merrill and Cerulli Associates to give you an idea of how much inherited money is set to change hands through 2045: Impact on the Housing Market One of the most immediate effects of this wealth transfer is on the housing market. Home affordability has been a concern for many aspiring buyers, especially in high-demand areas. The increase in generational wealth is expected to ease some of these challenges by providing future homeowners with greater financial resources. As assets are passed down through generations, buyers may find themselves in a better position to afford homes. Merrill talks about that benefit in a recent article: “While millennials face steep barriers . . . to buying a first home in many markets, ‘that’s a for-now story, not a forever story’ . . . The Great Wealth Transfer should enable more of them to become homeowners — or trade up or add a second home — either through inherited property or the funds for a down payment.” Impact on the Economy But the Great Wealth Transfer doesn’t just impact housing. It’s also going to provide a new avenue for entrepreneurial spirits to fuel economic growth. If someone is looking to start a business and they’re receiving funds like this, that money can used as the necessary capital to start a new company. This helps the next generation of innovators and business owners bring their ideas to life. Bottom Line While affordability remains a challenge in today’s housing market, the ongoing Great Wealth Transfer is poised to unlock new opportunities. As wealth is passed down and put to use, it’s expected to ease some of the barriers to homeownership and fuel other entrepreneurial endeavors.

3 GRAPHS THAT PROVE THERE WON’T BE A HOUSING MARKET CRASH

There are a whole lot of people who think a housing crash is coming. And who can blame them? From YouTube videos to social posts and media headlines…there’s so much noise about what’s ahead for the housing market.  Whether you realize it or not, this is negatively impacting your business, because this misconception is affecting your clients’ thoughts about the market, and ultimately, their decisions. HOW HOUSING CRASH FEARS IMPACT BUYERS AND SELLERS   On the one hand, you have people sitting on the sidelines waiting (and hoping for) home prices to drop. They want a crash to happen because they’re holding out for that deal of a lifetime. In fact, a survey found that 32% of people think it’s the only way they’ll be able to buy a home.   Then you have current homeowners. Maybe they’re thinking about selling, but worry they’ll take a loss if prices drop drastically. They don’t want to buy their next home at the top of the market to then have their investment go belly up.   If you’ve gotten this objection from even just one client or prospect, you have a chance to clear the air and prove your value as a housing market expert.   Stay Educated with the Latest Data & Insights THE MAIN REASON THE HOUSING MARKET WON’T CRASH   Let’s go back to your high school economics class. You’ll remember one of the first lessons it covered: supply and demand. When supply is low and demand is high, prices go up. When it’s the reverse, they go down.  Looking at it from the lens of the housing market, we can apply the same rule. While inventory is on the rise, there are still too few homes for sale to meet demand.   “There’s just generally not enough supply. There are more people than housing inventory. It’s Econ 101,” said Mark Fleming, Chief Economist at First American.  Therefore, inventory, or rather a lack thereof, is the biggest reason we will not see a drastic drop in home prices.   But if that isn’t enough to convince your clients that a housing crash isn’t coming, showing them these three graphs should help too.  WHY TODAY’S MARKET IS SO DIFFERENT FROM 2008   Even though there are more homes for sale now compared to last year, the overall supply is still pretty low. Nationally, we have about a third of the inventory we had in 2008. With fewer homes on the market, prices are unlikely to drop significantly. A repeat of 2008 would require a lot more people selling their homes and not enough buyers, and that’s just not happening, especially since so many people are holding on to their homes right now due to their historically low mortgage rates.  There’s also been talk about all the new homes being built. While new houses make up a bigger slice of the market than usual, it’s nothing to worry about. Builders aren’t overbuilding right now – they are just catching up from years of underbuilding since the last crash. So, even with more new homes available, the supply still isn’t meeting the demand.  Foreclosures and short sales aren’t flooding the market either. Thanks to tighter lending standards, we have more qualified buyers and fewer foreclosures. Even though foreclosures are up a bit, as expected, they’re still below normal levels. This means we’re not seeing even close to the number of distressed properties that we did during the last crash.  And like the cherry on top of a sundae, we have this quote from Business Insider to drive this point home: “Though many Americans believe the housing market is at risk of crashing, the economists who study housing market conditions overwhelmingly do not expect a crash in 2024 or beyond.”  So, with inventory levels low compared to demand, prices aren’t going to drop drastically. Even top industry economists and experts agree: this isn’t a bubble about to burst. We’re in a much more stable place than in 2008, and a market crash is unlikely.   Everyone in your sphere needs to hear this. They need to see the data and hear what trusted  professionals are saying, not some person on YouTube. That’s how you help them connect the dots and bust any fears or doubts.  And it’s why these three graphs are so powerful – they show just how different today’s market is from the one that led to the crash.   Being proactively educated instead of reactive is and always will be the best road to take if you want to be a true real estate expert.  That’s how you build trust, prove your value, and grow your business.