Ahwatukee residents who have been sitting on the fence about selling their home might just want to hop off.
Realtor.com says 2017 is poised to be the year of the home seller.
“Sellers have been in the driver’s seat for the last two years, but this year is shaping up to be even better for several reasons,” said the site’s chief economist, Jonathan Smoke. “Nothing is bad for sellers today.”
A combination of factors is coming together to make 2017 a prime seller’s market for most of the nation, according to the website.
Mortgage rates are still low, and that translates to lower monthly costs. Lower costs entice buyers, which is good for sellers.
Although mortgage rates have been ticking up since mid-October to slightly over 4 percent, the rates for a 30-year fixed mortgage—the most popular home loan—are still hovering near 30-year lows. For now.
“We expect them to hold at this 4 percent level for a while and continue to adjust up,” said Danielle Hale, managing director of housing research for the National Association of Realtors.
“Mortgage rates rarely move in a straight line,” she noted. “They could be in the 4.6 percent to 4.8 percent range by the end of the year.”
What does that have to do with home sellers? Well, potential buyers who are armed with that knowledge might hustle to close on a home before a rate hike.
What if a homeowner is nowhere near ready to put their house on the market?
That’s OK, Realtor.com advises. Even if rates nudge up by the end of 2017, they’re still expected to be low enough to seduce buyers.
The tipping point is when rates reach 5 percent, experts say. That’s when they could put the brakes on the robust real estate market.
“If they go above 5 percent, we’re going to see home prices come down,” said Trevor Levin, a real estate agent with Nourmand & Associates in Los Angeles.
Another reason is shrinking inventory.
Remember in Econ 101, which teaches that low supply and high demand lead to rising prices? The same is true—in spades—for residential real estate. When inventory shrinks, available homes become more valuable. That’s a good thing for sellers.
In 2007, just before the housing crash, existing home inventory peaked at 4.04 million homes for sale, according to NAR data. Fast-forward to November 2016: There were only 1.85 million homes for sale, 9.3 percent lower than the year before—and a whopping 54 percent lower than the 2007 peak.
“Quite simply, sellers this year have the least competition,” Smoke said.
Not only are there fewer homes for sale, but the time those homes have spent on the market has decreased year over year as well. If priced correctly, the typical home should move quickly, Smoke said. And that’s another boon for sellers.
“Many potential sellers don’t want to think about having to prep a home for showings and deal with an indefinite period of having to keep things in perfect shape,” he said. “Fast-moving inventory limits that pain.”
A third reason in sellers’ favor is that home prices are rising.
Lower inventory and greater demand have pushed up home prices. The median existing-home price in November 2016 was $234,900, up 6.8 percent from November 2015, when it was $220,000, according to the NAR. That was the 57th consecutive month of year-over-year gains.
Higher prices particularly benefit the seller whose property value plunged during the recession, sometimes to less than he owed. Thanks to rising prices, many homeowners whose property was underwater can now sell without suffering a big loss.
“2017 will be a rare ‘balanced market’ for buyers, because even though mortgage rates are edging up, many sellers have recovered enough equity to be able to afford to sell,” said Colby Sambrotto, president and CEO of USRealty.com.
Job markets are strengthening, which also helps sellers.
As unemployment decreases and wages increase, consumer confidence will climb. Increased confidence will spur buyers to jump into the market.
These pieces of the puzzle create a “virtuous cycle,” Smoke said. It’s not a term he coined, but it’s one he hasn’t had a chance to use in many years.
“These things are all connected,” Smoke said. “If people are confident, they’re more likely to buy big-ticket items like houses and cars. And then they spend more money on other things. It reinforces the economy, creating a virtuous cycle.”
The only ‘bad’ news for sellers?
People who sell their home today mostly likely will buy another. Then, all the economic factors that worked in their favor as a seller will work against them as a buyer.
Sellers have a few options. They can rent for a while, and hope that prices come down in the future. But whatever they save on the price of a house could be surrendered when mortgage rates climb to 6 percent—as predicted for 2019 and 2020, Smoke said.
The take-home lesson: Don’t wait, because mortgage rates won’t.
“There are opportunities for a seller-turned-buyer who wants to downsize in this market,” Smoke said. “You can lock in financing rates that you’ll never see again, and very likely make the trade-off work.”