INVENTORY DOWN 28% YTD CLOSED UNITS DOWN 28% YTD $121 AVERAGE $/SF UP 10$ YTD $218,000 AVERAGE SALE PRICE UP 15%
Limited inventory has been limiting buyer choices and creating increasing competition as new listings hit the market. Buyers who haven’t found what they are looking for, or who lost out on prior offers, are ready to pounce on well maintained and appropriately priced homes as they hit the market. The best new listings are frequently selling the day they hit the market.
The market is more competitive in lower and moderate price ranges. When grouping all Southeast Michigan price ranges, there is only a 1.7 month supply. Supply jumps to 3.8 months in the $400k-$800k price ranges and is 11.5 months in the “over $800k” market.
The year began with closed values dropping off as we closed many of last year’s year-end sales. Average closed $/SF has jumped $34/SF (21%) from $113/SF in February to $137/SF in April.
Looking ahead, although there has been some seasonal easing of the inventory issue (April inventories were up 2% compared to March), levels are expected to remain tight through the balance of the year.
Buyers can expect to face heavy competition to get the best houses as they hit the market.
SELLER’S MARKET PRICING STRATEGIES
In any market, a listing agent’s goal is to help the seller realize the highest price within a time frame that works well for the seller. Appropriate strategies shift depending on whether it’s a buyer’s market, a balanced market, or a seller’s market. In any market, sellers and listing agents should work together to create a situation where multiple buyers become excited early and act swiftly with enthusiastic offers that seller’s won’t refuse.
Prepare the home for sale. Buyers are lined up looking for well maintained homes and because there is a shortage of them, they are willing to compete and pay extra for move-in-ready homes. To get the best price, a home should be detailed the way a car dealer would detail a previously owned car to prepare it for market –everything should be maintained, clean and functional.
Price the home to get buyers excited. In today’s fast paced market, smart pricing typically brings high offers quickly. There is a backlog of anxious buyers in most price ranges who haven’t found a home they really like, or lost one or two of them to other bidders. The goal in pricing should be to get multiple buyers excited to the point of making motivated offers (so that they don’t lose out to other equally excited buyers).
It’s fine to push the pricing a little depending on the size and enthusiasm of the potential pool of buyers for the specific market and price range.
Some sellers are even taking the opposite approach and finding success with intentionally pricing low so as to create an auction-type environment with buyers getting caught up in trying to outbid each other. This strategy requires careful planning to be sure the home will be exposed to enough excited buyers to get the optimum price.
Higher end markets are typically moving slower with higher supply levels and market times than moderate and entry level markets. While there is generally less demand for higher-end homes, there are still plenty of buyers waiting for the well maintained and detailed high end listings.
More emphasis on active and pending comps. As homes sell more quickly, more emphasis should be shifted toward active and pending comps. In strong buyers’ markets, sold comps matter and active and pending comps ride “back seat”. When there’s a shortage of available homes, more emphasis should be placed on supply and how quickly it’s turning over. How many competitive active listings are there? How many competitive pending listings? What is the ratio of active listings to pendings? What was it a month ago? It’s not uncommon in this market to see pending comps outnumber active comps.
When pricing homes in a hot market, shift weight forward toward active and pending comparables. If a mortgage is likely, the house must appraise, but so long as the negotiated price is reasonable, worst case, there may be some adjustment needed for the appraisal.