San Luis Obispo and National Housing Inventory Disappearing

San Luis Obispo Housing Inventory

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) recently released their latest Existing Home Sales Report which gives insight into today’s market conditions nationwide.

Inventory Levels & Demand

Sales of existing homes rose 5.1% month-over-month in March and are 1.5% higher than this time last year. Sales rose in all four major regions in March.

Total unsold housing inventory is 1.5% lower than March 2015 at a 4.5-month supply and remains well below the six months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still below 4%, programs available for down payments as low as 3%, and you have an attractive market for buyers.

Homes sold in March were on the market for an average of 47 days and 42% of properties sold in less than a month.

Prices Rising

March marked the 49th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $210,700 (up 5.7% from 2015).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

Housing Supply SLO

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

“Buyer demand remains sturdy in most areas this spring and the mid-priced market is doing quite well. However, sales are softer both at the very low and very high ends of the market because of supply limitations and affordability pressures.”

Bottom Line

If you are debating putting your home on the market in 2016, now may be the time. The number of buyers ready and willing to make a purchase is at the highest level in years. Let me know if you are ready and we can get the process started.

 

How Important Is The List Price?

Central Coast List Price

In today’s market, where demand is outpacing supply in most cities here in San Luis Obispo and Santa Barbara counties, pricing a house is one of the biggest challenges we’ll face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best real estate agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered their price. His article, Listing Price, Time on Market and Ultimate Selling Price, published in Real Estate Economics revealed:

“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”

Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.

Don’t build “negotiation room” into the price.

Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.

Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!

One great way to see this is with the chart below. The higher you price your home over its market value, the less potential buyers will actually see your home when searching.

Price Visibility Chart

A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house.

Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

The Price is Right

Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. I am here to simply and effectively explain what is happening in the your specific market and how it applies to your home. I am committed to telling you what you need to know rather than what you want to hear. This will put us in the best possible position for success in selling your home in today’s market.

BUYING A HOME IS 36% CHEAPER THAN RENTING NATIONWIDE

Buying-Hom-36-Less-Expensive

 

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers actually show that the range is an average of 5% less expensive in Orange County (CA) all the way up to 46% in Houston (TX), and 36% Nationwide! 

Other interesting findings in the report include:

  • Interest rates have remained low and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
  • Some markets may tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
  • Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989. 

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many San Luis Obispo renters out there who would like to evaluate your ability to buy this year, my team and I are here to help when you’re ready. It’s not as daunting as you might think, trust me, it will be fun!

-Renier-

Official Move Announcement

I know that I made you all wait, so here’s my official company move announcement! I am excited and proud to do so, it’s been a long process but like anything else, to do things properly it takes time, right? Thank for your support, patience, and I am always here if you need my help. I’ll be putting out more information out about new services and tools we can utilize to ensure your success in both buying and selling homes here on the central coast.

I look forward to working with you-