We have all heard that the real estate market is local. This couldn’t be truer with the last few years of the national housing crisis.
National media had been constant about how far the mortgage and housing crisis had affected every part of the economy. But that is all behind us, or so it seems.
Now the headlines are boasting soaring sales, higher prices and forecasting blue skies ahead. But what is going to happen in Newburyport? Yes, I agree that the pendulum has changed; prices are rebounding and the number of sales is increasing.
Notice the increase of transactions from 2011 to 2012 (28 percent single family and 19 percent condo). It will still take a year or so for prices to get back to where they were in 2006, as price follows volume.
This is basic Economics 101: Sales volume changes first, and only after that do prices change. Everything is pointing to a robust spring market … low inventory, low mortgage rates, easing of lender restrictions, pent-up demand and, let’s face it, being a destination town we are somewhat insulated from the norm. So yes, it is a seller’s market and we all have buyers ready to buy.
For the first time in a long time I’m optimistic the market is really on its way to recovery. But as the wise and noble Yogi Berra claims, “It’s tough to make predictions, especially about the future.”
So I am cautiously optimistic for two reasons … interest rates will go up and the current inventory is too low. I’m not an economist, but many of them, along with other industry analysts, say there’s little doubt rates will rise, and as much as a full point higher from where they are now by the fourth quarter ’13.
Interest rates historically rise after an election year. Higher interest rates translate to fewer buyers and lower prices. As for the low inventory, it’s the lowest I’ve ever seen (this year is off 27 percent from the closest year, 2011, and the previous seven years has an average of 87). Granted there is no correlation between standing inventory in February and what will follow for the year, but when it this low, it needs to commented on.
As in all markets, the relationship between supply and demand determines the price. Unless we see a large increase in inventory quickly, prices will rise. That is not necessarily a bad thing, but if asking prices rise too quickly, then we will exceed the equilibrium and the properties will stay on the market for a longer period of time, have price reductions and ultimately not sell. But if properties are priced correctly at market value, then one should get offers in a timely manner.
There is also a school of thought that if priced below market value, one should get multiple offers exceeding asking price in the first week (this works if the marketing is done correctly). In short, pricing a property correctly is paramount under all market conditions.
When thinking about selling, it is always good practice to interview two Realtors and if there is more than a 5 percent spread in their market value of your property, consider a third opinion. Keep an eye out for the one that has an analytical advantage; they take the same information that others have but process it differently and may come up with a different and more correct conclusion.
Also look for a Realtor who has an informational advantage; this is when they know something that others don’t. And never use a Realtor who claims they or their office have a buyer for your property; hence, you do not need to make it public in the Multiple Listing Service.
They are doing a disservice to you by not trying to get a higher price. Make it public and put it in the MLS; that way you will get the highest fair market value and best terms for your property.
Remember, it is now a seller’s market with many buyers waiting for properties to come on the market.
Bill Barrows is a Newburyport real estate agent.