Pricing remains key for selling

There are reports that higher home prices, rising interest rates and limited inventory in some markets are putting downward pressure on the real estate market. But only a few industry analysts believe that this will “stall” the recovery of the real estate market.

However, home sales are not expected to maintain the recent rate of sale. According to Redfin, there was a 15% decrease in homes receiving multiple bids from March to August of this year.

In addition, the National Association of Realtors (NAR) reports that there was a decline in showings for August. This report was based on electronic key boxes placed by listing agents that keep track of showings through Realtor access.

Sales of existing homes, as an indicator, lag because they measure sales having gone under contract earlier in the summer when the market also expected to see an increase of last year’s sales for this time frame.

New-home builders are reporting that higher home prices and interest rates are responsible for the 12.7% decrease in new-home orders during July and August as opposed to the same time last year. Additionally, new home sales reportedly decreased 4% in August from the prior month. Overall, new-home orders increased 1% from 2012 compared with year-over-year gains of 11% in July and 25% during the second quarter.

There are other factors also responsible for a decrease in new home orders, including a shortage of parcels for developers to purchase and the tighter lending policies for construction loans.

As most noticed, mortgage rates have risen more than a full percentage point since May. It is also anticipated that the Federal Reserve will reduce measures that caused interest rates to fall to historically low levels.

Realtors in Greenwich have been cautioning their sellers to appropriately price their homes and set realistic expectations. Pricing a home too high can cause it to languish on the market and eventually sell for less than if it had been priced close to market value. There are still sellers chasing the market, by reducing their homes a little too late. This also puts downward pressure on the market by slowing activity. There are some sellers who bought at the peak of the market and are still trying to break even.

Increasing interest rates and homes prices at the high-end of their price range will challenge “marginal” buyers. These buyers will look for less expensive properties to ensure their affordability or being able to secure a mortgage.

The inventory of existing homes for sale has fallen to a 4.8-month supply in July, which is approximately half of the supply in July 2010. However, this inventory has increased six consecutive months but is still low by historical levels, according to Trulia.

Also, the inventory of turn-key or renovated homes is low. This inventory is very important as buyers have to otherwise budget for renovations taking away from their purchasing power.

With the ticking up of prices across the country there has been a reduction in investors as buyers. In July, investors represented 18% of buyers as compared to 20% in July 2012.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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