Drop in Demand Means Houses on the Market Taking Longer to Sell
More homes are going on the market than are being sold.
Data released this year by Trulia indicates a slight decrease in housing demand across many major U.S. markets. For the first time in the last three years, the number of homes listed “for sale” in the first half of 2019 was higher than the same time the year before. This is a significant change. Since 2016, housing inventory has been decreasing year after year as a result of high demand, creating a more favorable market for home sellers. Today, houses in many fast-growing cities are sitting on the market longer as demand drops.
What does this mean for sellers?
If these trends continue, it isn’t great news for sellers looking to list their house with a real estate agent. The decrease in housing demand means that homes for sale on the MLS (multiple listing service) have more competition and fewer potential buyers. When inventory is higher than demand in a residential housing market, people looking to purchase homes have more options to consider. This is sometimes called a “buyer’s market,” where sellers have fewer interested parties lined up and thus fewer bidding wars to drive up sales prices.
The likely reason for inventory remaining constant in 2019 rather than decreasing is housing affordability. In many residential real estate markets the average price of buying a home has outpaced what first-time home buyers can afford. This means there are fewer qualified buyers for each house.
In response, developers have begun saturating the market with more “starter” and “trade-up” homes. While this may be welcome news for first-time buyers, it sticks many sellers with high holding costs as they continue paying their mortgage month after month while fielding fewer and fewer offers. Owners of dated or damaged single family homes face a riskier proposition if they decide to invest in renovating their home and listing it for top dollar.
How to overcome a drop in demand
All hope is not lost for sellers looking to sell their home quickly. Even when the current market favors homebuyers, there are several other options for you to consider. Here are three common alternatives:
Waiting until the market shifts is an option for those who aren’t in a hurry to sell their home. It could be months or years before the inventory surplus is counterbalanced by new homeowners entering the market. There are tons of factors that come into play in that regard, and none of them are under your control.
However, if time is not of the essence, waiting provides you the opportunity to watch the market while you continue to pay down your mortgage. When you decide to sell, you’ll have less debt to pay off.
2. Reduce the list price until offers start to come in
The second option might not be agreeable for you as a seller, but it can certainly help attract offers. Price reductions are the bane of a seller’s existence, as they drastically cut into your net proceeds, but in markets where the inventory far exceeds demand, cutting the price may be necessary to grab buyers’ attention.
But beware. If you’re interested in a price reduction on your home, you should understand that it can create a perception among buyers that something is wrong with your house. This stigma may lead to your house taking even longer to sell.
Further reading: Overpricing a House Costs More Than Money
3. Sell the home off market for cash
Selling your home off market for cash is a great option if you want to get rid of the home as soon as possible. With Sundae, you can list your house on our marketplace of investors. Sundae’s marketplace creates competition among home investors who bid on your home, thereby ensuring that you receive the highest offer for your home. Plus, you may be eligible to receive a $10,000 cash advance if you need it for moving or other expenses. This is faster and more convenient than the traditional residential real estate market, and can be a great option for sellers looking to overcome an inventory surplus.
Putting your home up for sale in a buyer’s market could land you in a legally-binding listing agreement. This means you’ll face a potentially long sales period tied to one agent with exclusive rights to a commission, and you’ll be contractually prevented from selling your house off market or on your own. Remember, you still have to pay your mortgage until you sell or until the listing agreement expires.
An alternative to market listings
Given the heightened risk of a lengthy sales process, it might not be worth the time and money required to prepare your house, find a good agent, and list it on the market.
Many sellers believe, erroneously, that homes must be sold on the MLS. This misconception may reflect the fact that there are 2 million active real estate agents in the U.S. today, all of whom have an interest in homeowners listing their properties on the market.
Selling your house off market provides a clear alternative to the agent-led sales and marketing process. This alternative comes with advantages and disadvantages, so you’ll need to do your homework and carefully calculate your net proceeds from each type of sale. While listing the house on the MLS will probably fetch a higher price than an off-market sale, that price will not account for commissions, fees, holding costs, costs of repairs and cleanings, and the time and energy required to maintain your house for sale for what could be months.
Thankfully, we’ve put together an in-depth guide to walk you through this decision and help you determine which option is best for your needs. If you’d like to learn more about how Sundae can help you sell your house, sign up today.