The Number One Mistake Sellers Are Making: Overpricing Their House

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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.

Let’s connect so you can avoid making a pricing mistake that’ll cost you.

What Every Homeowner Should Know About Their Equity

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Curious about selling your home? Understanding how much equity you have is the first step to unlocking what you can afford when you move. And since home prices rose so much over the past few years, most people have much more equity than they may realize.

Here’s a deeper look at what you need to know if you’re ready to cash in on your investment and put your equity toward your next home.

Home Equity: What Is It and How Much Do You Have?

Home equity is the difference between how much your house is worth and how much you still owe on your mortgage. For example, if your house is worth $400,000 and you only owe $200,000 on your mortgage, your equity would be $200,000.

Recent data from the Census and ATTOM shows Americans have significant equity right now. In fact, more than two out of three homeowners have either completely paid off their mortgages (shown in green in the chart below) or have at least 50% equity in their homes (shown in blue in the chart below):

Today, more homeowners are getting a larger return on their homeownership investments when they sell. And if you have that much equity, it can be a powerful force to fuel your next move.

What You Should Do Next

If you’re thinking about selling your house, it’s important to know how much equity you have, as well as what that means for your home sale and your potential earnings. The best way to get a clear picture is to work with your agent, while also talking to a tax professional or financial advisor. A team of experts can help you understand your specific situation and guide you forward.

Bottom Line

Home prices have gone up, which means your equity probably has too. Let’s connect so you can find out how much you have in your home and move forward confidently when you sell.

Nationally and some Florida Cities See Jump in Active Listings

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new home owners receiving keys

courtneyk, iStock, Getty Images
MARCH 18, 2024

In Florida and nationwide, the housing supply is rebounding as sellers get used to elevated mortgage rates and the lock-in effect eases, Redfin found.

MIAMI – Active listings, or the total supply of homes for sale, in Cape Coral, North Port and Fort Lauderdale saw the biggest jump in the nation in February, the real estate brokerage firm Redfin reported. Nationwide, active listings climbed 0.8% from a month earlier on a seasonally adjusted basis and were little changed (-0.1%) from a year earlier — the smallest annual decline in months.

Nationally, new listings jumped 3.8% month over month on a seasonally adjusted basis in February to the highest level since September 2022. They were up 14.8% year over year, the largest annual gain since May 2021. In Florida, condo listings were the driving force contributing to the jump in supply amid a surge in HOA and insurance fees.

“The housing market is nothing like it was two years ago during the pandemic homebuying frenzy, but it’s better than it was last year. It’s coming back,” said David Palmer, a Redfin agent in Seattle. “Sellers who were on the fence in 2023 are now listing. They’re more used to elevated rates now. There still aren’t enough listings to quench pent-up buyer demand, but it’s getting better.”

Nationwide, housing supply is on the rise because the “lock-in effect” is easing; eventually, homeowners who have been holding on to their ultra-low mortgage rates simply have to move.

“February was a mixed bag for the housing market and the economy,” said Redfin Economics Research Lead Chen Zhao. “Housing supply is finally starting to recover in a meaningful way, which is great news for buyers who for months have been competing for a tiny pool of homes for sale. Still, many house hunters are hesitant to pull the trigger because mortgage rates and home prices remain elevated.”

Mortgage-purchase applications slid in February as mortgage rates ticked back up after dropping in December. The average 30-year-fixed mortgage rate was 6.78% in February up from 6.64% in January.

At the same time, prices continue to rise because, despite the recent uptick in listings, there’s still not enough supply to meet demand, Redfin said. Both new listings and active listings remained far below pre-pandemic levels in February.

“If you price your home reasonably, buyers will show up. If you don’t, buyers will wait for you to drop the price,” Palmer said. “I recently listed an estate sale fixer upper for $550,000 and it got 14 offers, sold for $75,000 over the asking price and the buyer waived every contingency.”

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© 2024 Florida Realtors®

Latest Data Shows Home Prices, Rates May Improve

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Bar chart with arrows and houses

NOVEMBER 17, 2023

Freddie Mac Chief Economist: “New data indicate inflationary pressures are receding” – which, along with lower mortgage rates, may lure more homebuyers into the market.

JONESBORO, Ga. – Mortgage rates have fallen for three straight weeks, with the 30-year fixed rate averaging 7.44% Thursday, down from 7.5% a week earlier, according to Freddie Mac.

But the rate remains well above last year’s level – 6.61%.

Why did the rate go down this week? “New data indicate that inflationary pressures are receding,” said Sam Khater, Freddie Mac’s chief economist.

The government reported Nov. 14 that consumer prices climbed 3.2% in the 12 months ended in October, decelerating from 3.7% in September.

“The combination of continued economic strength, lower inflation and lower mortgage rates should likely bring more potential homebuyers into the market,” Khater said.

Housing sales slump

But so far this year, high mortgage rates have stifled sales.

Existing-home sales slid 2% in September from August, according to the National Association of Realtors (NAR). Sales retreated 15.4% from a year ago.

“As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” said NAR Chief Economist Lawrence Yun.

But with inventory limited, demand has been strong enough, despite the mortgage rate increase, to push home prices higher. The median existing-home price registered $394,300 in September, up 2.8% from $383,500 a year earlier.

“Lack of inventory is providing the support for high prices, but it’s also making it super difficult for first-time buyers to enter the housing market,” Yun noted.

Yun expects the depressed state of sales to last through year-end, with home sales dropping 18% for 2023 as a whole. That comes after a 17% decline last year.

Light at the end of the tunnel?

But things are starting to look up on the supply side. The inventory of unsold existing homes climbed 2.7% in September from August to 1.13 million. That’s the equivalent of 3.4 months’ supply at the current monthly sales pace. Six months is typically considered a balanced market.

“Builders are back on their feet, up 5% in newly constructed home sales year to date,” Yun said. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”

And mortgage rates may have topped out. Many economists believe inflation is falling enough to keep the Federal Reserve from raising rates again.

“I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”

He forecast mortgage rates will slide to 6%-7% by the spring buying season and anticipates that more sellers will then enter the market.

Still, if you’re a renter who wants to buy, you might want to hold off until housing prices correct. For many, mortgage payments are just too high for a house to be affordable. The rule of thumb is that no more than 28% of your income should be needed to pay a mortgage.

Copyright © 2023 Clayton News Daily. All rights reserved.

Homeowner Net Worth Has Skyrocketed

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If you’re weighing your options to decide whether it makes more sense to rent or buy a home today, here’s one key data point that could help you feel more confident in making your decision. Every three years, the Federal Reserve Board releases the Survey of Consumer Finances (SCF). That report covers the difference in net worth for both homeowners and renters. Spoiler alert: the gap between the two is significant.

The average homeowner’s net worth is almost 40X greater than a renter’s. And here’s the data to prove it (see graph below):

The Big Reason Homeowner Net Worth Is So High

In the previous version of that report, the net worth of the average homeowner was roughly $255,000 and that of the average renter was $6,300. But in the release that just came out this year, the gap widened as homeowner net worth climbed dramatically. As the Survey of Consumer Finances (SCF) report says:

“. . . the 2019-2022 growth in median net worth was the largest three-year increase over the history of the modern SCF, more than double the next-largest one on record.”

One of the biggest reasons homeowner net worth skyrocketed is home equity.

Over the last few years, known as the ‘unicorn’ years for housing, home prices went through the roof. That’s because there weren’t enough homes for sale, and there was a big influx of buyers rushing to buy them and take advantage of the then record-low mortgage rates. That imbalance of supply and demand pushed prices higher and higher. As a result, most homeowners who had a home during that time saw their equity grow a lot.

If you’re still in the middle of making your decision on whether to rent or buy, you may wonder if you missed the boat on the big net worth boost. But here’s what you need to realize. As a recent article in The Ascent explains:

“Whether your net worth increased in recent years or not, there are steps you can take to boost that number in the coming years. . . buying a home can be a great way to grow your net worth, since home values have a tendency to rise over time.”

Historically, home prices climb over time. Even now that mortgage rates are closer to 7-8%, prices are still rising in many areas of the country because supply is still low compared to demand. That’s why expert forecasts for the next few years call for ongoing appreciation – just at a pace that’s more typical for the housing market.

While it likely won’t be the record ramp-up that happened over the last few years, people who buy now should continue to grow equity in the years ahead. That means, if you’re ready and able to buy a home today, you’ll be making an investment that’ll help build your net worth in the long run.

As Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), says:

“. . . when deciding to rent vs buy, one must calculate the total cost of homeownership (maintenance, utilities, commuting, etc.) and the total financial benefit. Based on new Fed data . . . the median net worth of homeowners was $396,200 vs renters at $10,400. There is no question about the wealth gains that homeownership provides.”

Bottom Line

If you’re on the fence about whether to rent or buy a home, remember that homeownership can give your net worth a big boost over time. If you want to learn more about this or the many other benefits of owning a home, let’s connect.

Home Price Forecasts Revised for 2023

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Some Highlights

  • Last year, some housing experts projected a decline in home prices by the end of 2023. But that didn’t happen – inventory was just too low.
  • While it’s normal for experts to re-forecast throughout the year, the good news for 2023 is that prices are no longer projected to decrease.
  • Let’s connect so you know what’s happening with home values in our local area.

Sources

Home prices ticked up in April as market faced a mixed bag

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One new figure shows home prices rose in April compared to March but fell year over year. Economists, however, are fairly upbeat

Home prices ticked up in April as market faced a mixed bag

Photo by DALL-E

BY JIM DALRYMPLE II
June 28, 2023

A pair of reports out Tuesday reveals that U.S. home prices ticked up slightly in April compared to March, though the reports also offered mixed signals about how well the market is holding up over the longer term.

Selma Hepp

Selma Hepp

Of Tuesday’s new numbers, the S&P CoreLogic Case-Shiller Index shows the biggest month-over-month gains in April, rising 1.3 percent. In a blog post on the numbers, CoreLogic Chief Economist Selma Hepp described this uptick as a “strong gain” for home prices and notes that it suggests “homebuying activity is heating up in many markets.”

“In addition, price gains among high-tier homes are once again showing a strong rebound,” Hepp added in a statement.

April’s gains represent the third consecutive month of home price increases, according to a report on the index.

Credit: CoreLogic

Also on Tuesday, the U.S. Federal Housing Finance Agency released its monthly FHFA House Price Index report. That report shows that home prices rose 0.7 percent in April compared to March.

Both the FHFA House Price Index and the S&P CoreLogic Case-Shiller Index are respected measures of U.S. home prices. Broadly speaking, they tend to highlight the same trends, though differences in methodology mean they don’t produce exactly the same numbers.

For example, the two indexes weigh differently valued homes in different ways, and the FHFA House Price Index includes reappraisals while the S&P CoreLogic Case-Shiller Index does not.

Interestingly, the two figures were in disagreement about what happened to home prices in April 2023 compared to April 2022. Year over year, the S&P CoreLogic Case-Shiller Index experienced a 0.2 percent decline in April — a drop that Hepp described as “the first annual loss since April of 2012.”

However, the report on the FHFA House Price Index states that in April prices actually rose 3.1 percent year over year. Despite that uptick, Nataliya Polkovnichenko — supervisory economist in FHFA’s Division of Research and Statistics — said that “house prices in some regions of the country continued to decline” in April.

The S&P CoreLogic Case-Shiller Index report also highlights some regional variation, with Miami seeing the biggest year-over-year price gains at 5.2 percent. Boston and Cleveland experienced the biggest month-over-month gains, at 2.9 percent and 2.3 percent, respectively.

Credit: CoreLogic

The report also reveals that month-over-month gains in many metro areas actually outpaced what was happening before the COVID-19 pandemic.

Economists generally responded to Tuesday’s new numbers with optimism. In a statement, Bright MLS Chief Economist Lisa Sturtevant suggested “a summer rebound” could be in the works thanks to “this surprisingly resilient housing market.” And she suggested, “this could be the turning point for home prices.”

Lisa Sturtevant

Sturtevant also points to high demand as a key factor in the current market.

“Rising mortgage rates were supposed to quell homebuyer demand and push home prices down,” Sturtevant said. “As rates escalated last year, buyer activity did stall. However, higher mortgage rates have not dampened buyer interest as much as many thought (or hoped) they would. As a result, while the Case-Shiller index showed a decline in April, the big home price drops some had predicted have not materialized.”

In a similar vein, George Ratiu — chief economist for real estate insights and analytics company Keeping Current Matters — said in a statement that the S&P CoreLogic Case-Shiller Index numbers “highlighted a spring housing market regaining its footing after a winter of dire forecasts.”

George Ratiu

Ratiu went on to note that demand rebounded in the spring, but that it also “ran headlong” into limited supply. That dynamic pushed prices higher and, to the surprise of some buyers, resulted in “multiple bids on well-priced properties,” Ratiu said. He added that this outcome is “an unexpected turn of events from the doom-and-gloom forecasts issued at the start of the year.”

“Real estate fundamentals remain out of balance, with demand still outpacing supply, and have a way to go toward health,” Ratiu said. But he also ultimately concluded that the “return of seasonal patterns is reinforcing the view that we are moving in a promising direction.”

Email Jim Dalrymple II

It’s a Tough Market for Buyers – Many Don’t Care

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woman showing buyers a house

MAY 12, 2023

By Kerry Smith

Survey: Most would-be buyers (55%) know it’s a really tough market right now, but a majority (54%) still plan to maintain current goals or speed up the buying process.

CHARLOTTE, N.C. – Many hopeful homebuyers – especially those in their 40s and younger – are forging ahead with plans to buy homes despite believing the market favors sellers, according to Bank of America’s 2023 Homebuyer Insights Report.

More than half of prospective homebuyers surveyed (55%) believe the market is more competitive than last year – but just as many (54%) plan to either speed up their home purchases or buy when they originally planned.

The percentage is even greater for younger generations: 62% of Gen Z and 55% of millennials.

However, not all want-to-be buyers plan to stay in the market, at least not now. Two in five (39%) believe it’s a seller’s market, while 18% say it’s a buyer’s market and 31% say it’s neither.

Current challenges cited by buyers

  • High prices and interest rates (51%)
  • A lack of cash reserves for down payments (37%)
  • A low credit score (37%)

Still, nearly 40% of those prospective homebuyers said they feel more confident in their ability to buy a home today versus last year, compared to 26% who are less confident and 28% who feel about the same.

“The market is less frenzied as rates have moderated, and that may be impacting perception,” says Matt Vernon, head of retail lending at Bank of America. “And low inventory is still creating a highly competitive environment. Homebuyers are doing the right thing by taking time to understand the market, weigh their priorities and determine what fits into their budgets.”

The motivation for many buyers? Financial security. Homeownership has historically helped families build long term-wealth.

A majority (56%) of Gen Z and the same percentage of millennial homebuyers plan to purchase in the next two years – nearly on par with Gen X (58%).

Nearly half (47%) of all prospective buyers say they’d buy a home in the current housing market because they’re tired of renting and of rent increases; 28% want to start building equity.

Inactive homebuyers still curious

Even hopeful buyers waiting for the housing market to cool are forging ahead in their own way, according to the study: More than two-thirds (67%) still actively look at homes for sale, either scrolling through a real estate app (52%) and/or visiting open houses (31%).

Those scanning for homes find it to be an enjoyable pastime (41%), a way to dream about their future home (37%) and a window into how others have decorated their spaces (32%).

Beyond simply looking for inspiration, two-thirds (65%) of those who scroll through listings are interested in what their current budget would get them if they were to buy today.

© 2023 Florida Realtors®

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illustration of houses with red graphic line showing

APRIL 7, 2023

Why Does It Still Feel Like a Seller’s Market?

By Kerry Smith

RE usually sees cycles between buyer’s and seller’s markets, but this time it’s a bit different. Supply vs. demand hasn’t changed because both sides pulled back.

SEATTLE – New listings fell 21.8% year-to-year during the four weeks ending April 2, one of the biggest drops since the start of the pandemic, according to a Redfin study.

An increasing number of homeowners don’t want to move because they still have generational-low mortgage rates secured only a few years ago. While rates have fallen for four weeks in a row, according to this week’s report, they’re still about twice as high as they were before 2021.

As a result, buyers unafraid of current mortgage rates quickly scoop up new listings. Of homes going under contract, nearly half are doing so within two weeks; at the beginning of 2023, it was about 25%.

“Elevated mortgage rates are perhaps an even bigger deterrent for would-be sellers than for would-be buyers,” says Redfin Deputy Chief Economist Taylor Marr. “Giving up a 3% mortgage rate for one in the 6% range is a tough pill to swallow. Today’s serious homebuyers have grown accustomed to the idea of a 5% or 6% rate and have adjusted their budgets accordingly.”

“Shiny new listings are getting multiple offers and selling fast. The caveat is that they have to be priced correctly from the beginning,” says Denver Redfin agent Stephanie Collins. “One of my buyers recently made an offer on a move-in ready home in a popular area. The home was priced right in line with the market at $520,000; it received eight offers and went for $560,000 to a competing buyer.”

Florida ranks near top for rising home prices

In cities where buyer demand outpaces seller supply, home prices continue to go up – and Florida is home to three of the top five U.S. cities for price increases.

While Milwaukee led the nation for price increases (up 11.4% year-to-year), Fort Lauderdale came in second (up 8.9%), followed by West Palm Beach (up 8.2%), Miami (up 7.9%) and Columbus, Ohio (up 6.3%).

On the flipside, the top five price declines in the U.S. were largely on the West Coast: Home prices dropped in 28 of the U.S.’s 50 most populous metros, with the biggest drop in Austin, Texas (down 14.7% year-to-year), Sacramento (down 11.7%), Oakland, California (down 10.4%), San Jose (down 10.2%) and Seattle (down 9.6%).

© 2023 Florida Realtors®

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Back of man starting at huge dollar bill with arrow in front heading lower

MARCH 30, 2023

Mortgage Rates Hit Lowest Level in 6 Weeks

By Matt Ott

At 6.32%, the average 30-year, fixed-rate mortgage declined from last week’s average 6.42% – a ray of hope for buyers seeking to secure a home this spring.

WASHINGTON – The average long-term U.S. mortgage rate inched down this week to its lowest level in six weeks, just as the spring buying season gets underway.

Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate fell for the third straight week to 6.32%, from 6.42% last week. The average rate a year ago was 4.67%.

The recent decline in mortgage rates is good news for prospective homebuyers, as many were pushed to the sidelines during the past year as the Federal Reserve cranked up its main borrowing rate nine straight times in a bid to bring down stubborn, four-decade high inflation.

Also helping buyers, home prices appear to be leveling off. The national median home price slipped 0.2% from February last year to $363,000, marking the first annual decline in 13 years, according to the National Association of Realtors.

One thing that hasn’t gotten much better is the supply of homes.

“Over the last several weeks, declining rates have brought borrowers back to the market, but as the spring home buying season gets underway, low inventory remains a key challenge for prospective buyers,” said Sam Khater, Freddie Mac’s chief economist.

Rising borrowing costs can add hundreds of dollars a month in costs for homebuyers and put the brakes on the housing market. Before surging 14.5% in February, sales of existing homes had fallen for 12 straight months to the slowest pace in more than a dozen years.

In 2022, existing U.S. home sales fell 17.8% from 2021, the weakest year for home sales since 2014 and the biggest annual decline since the housing crisis began in 2008, the National Association of Realtors reported earlier this year.

The average long-term rate hit 7.08% in the fall – a two-decade high – as the Federal Reserve quickly cranked up its key lending rate with multiple jumbo hikes in a bid to cool the economy and stymie persistent, four-decade high inflation.

In their latest quarterly economic projections, the policymakers forecast that they expect to raise that key rate just once more – from its new level of about 4.9% to 5.1%, the same peak they had projected in December.

While the Fed’s rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investor expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home.

Treasury yields have fluctuated wildly since the collapse of two mid-size U.S. banks two weeks ago. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, was 3.57% Thursday, but had been above 4% early in March.

The rate for a 15-year mortgage, popular with those refinancing their homes, fell this week to 5.56% from 5.68% last week. It was 3.83% one year ago.

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.