You might have heard that it’s a seller’s market in Houston. Or you might know that it’s generally regarded as a seller’s market throughout the country. But what does that actually mean? Is it really a good time for homeowners in Houston to sell their houses? And if so, how much do you stand to gain?
Even more importantly, how can you tell, for sure, that it’s a seller’s market?
Buyer’s Markets and Seller’s Markets
Let’s start with the basics. A buyer’s market is a set of economic conditions where buyers are favored. Oftentimes, listing prices are low and there aren’t many active bidders – so buyers can often land major real estate deals for a low amount of money. They also don’t have to fight or negotiate hard since sellers might have to wait weeks to get another bid.
Seller’s markets function as the opposite. They’re a set of economic conditions where sellers are favored. This often means sellers can get away with listing their homes for a higher price – and even then, they may have many bids to entertain, pushing the price far above list. They can afford to be choosy with offers, and buyers are often forced to jump through hoops to buy a good home.
Generally speaking, buyer’s and seller’s markets occur in cycles. It’s perfectly normal for the real estate period to go through a growth cycle that favors sellers, then gradually reverse the trend with easing growth until the market favors buyers again. Accordingly, it’s tough to get the timing right.
Indications of a Seller’s Market
How can you tell if it’s a seller’s market?
There are several signs that are somewhat difficult to ignore:
- Limited supply. At the core of any real estate markets are the forces of basic economics: supply and demand. When demand is high and supply is low, prices tend to rise. When demand is low and supply is high, prices tend to fall. When there aren’t many houses on the market and people are still buying them in droves, it’s only natural for prices to rise – and in line with them, a seller’s market will develop.
- Low interest rates. Low interest rates also favor sellers. Most people buying homes will take out a loan to do so. The lower the interest rate on the home is, the lower the buyer’s monthly payments will be; accordingly, low interest rates will push buyers to buy more expensive homes than they otherwise could afford. It also pushes more buyers into the market, hoping to take advantage of these low rates. More buyers, more demand, and higher prices all favor sellers.
- Higher list prices. One of the obvious signs of a seller’s market is a set of high list prices that keep getting pushed higher. If you follow selling prices closely, you’ll notice a rising trend. Gradually, over the course of months, you’ll see list prices inching higher and higher per square foot.
- Multiple bids. Despite the higher list prices, in a seller’s market, there will be so much buyer demand that most homes attract multiple bids. People are eager for an opportunity to purchase properties, so most sellers are in a strategically valuable position.
- Bids above asking. Buyers know that they have multiple other buyers (and multiple bids) to contend with. Rather than be deterred, most buyers use this as motivation to bid above asking. They want to stand out and have a good chance of winning the bid, so offers above asking aren’t uncommon.
- Waived contingencies. In a seller’s market, bids are more likely to waive inspections and waive contingencies. This still represents a minority of home purchase offers, but it can be valuable to sellers looking to have a smooth, hands-off transaction.
Houston Compared to the Rest of the Country
We also need to think about buyer’s and seller’s markets as they impact the entire country. Just because it’s a seller’s market in Houston doesn’t mean the rest of the country is experiencing similarly high housing price increases. And just because the country is, in general, experiencing a trend toward a seller’s market doesn’t mean prices are spiking in Houston. Local real estate markets grow and shrink in cycles loosely correlated with national trends, but ultimately, these local cycles are independent.
Accordingly, you’ll need to do your research in Houston before making any major purchasing or selling decisions. There’s no “official” seller’s market status; instead, you’ll have to review the variables on your own and determine what conditions are generally like.
Should You Take Advantage of a Seller’s Market?
So if Houston is currently in a seller’s market, does that mean you should sell your home right now?
There are a few important things to consider before moving forward. For starters, understand that it’s hard to get the timing just right. It’s true that the market is hot right now and selling your home could fetch a relatively high price, but that price may climb even higher in the next several months (or even years). By contrast, it’s possible that we’re already past the peak – and prices may fall slightly before going through their next period of growth. Even the best real estate agents can’t predict the future, so perfectly timing the market is practically impossible.
You should also consider your next move. If you’re interested in staying in Houston, selling your house will necessitate you buying a new one (or renting). If this is the case, you’ll be able to sell your home for a relatively high price, but you’ll also be forced to buy a new home for a relatively high price, negating some of your gains.
Selling a home is also difficult. Even if it’s a seller’s market, you’ll have many challenges to navigate. That’s why it pays to get help.
Are you interested in selling your Houston property? Or are you thinking about your next move? Whatever your real estate goals are, Green Residential can help. Contact us for a free consultation today!