Homeowners thinking about jumping back into the market should give serious consideration to the Case-Shiller Home Price Index. Last week, the index showed its largest year-over-year gain since just before the real estate market collapsed in 2006. During the past year, prices rose 8.1% in January from a year earlier. That’s the largest gain in over six and a half years. The spike in prices has created a “Selling Window of Opportunity” idea for people selling their homes. Consider the impact the release of this information will have on both buyers and sellers.
Buyer Motivation – There is now absolute proof that delaying a purchase into the future will cost buyers a lot more money. It’s been said that “The fear of loss is far greater than the ecstasy of gain”. In other words, losing out is more compelling than the benefits of purchasing real estate. The greatest fear home buyers have had in recent years was the fear of paying too much money for a home. Even if purchasing would improve the quality of a buyer’s life, the over-riding consideration was still the risk of losing money if the property values declined. This fear has now been replaced by an even greater fear. The fear of paying much more for the home they want if they wait any longer. This fear will drive remaining buyers who have been sitting on the fence, to pull the trigger on a purchase now.
Seller Motivation– From a seller’s standpoint, the greatest fear has been the fear of selling low and losing money. With property values up 8.1% in the past year according to Case-Shiller, selling for a fair price is more likely now than it has been for over 6 years. And short-term, the news is even better for Sellers. Inventory levels have been rapidly declining and buyers know it. In other words, Sellers are now in the driver’s seat with respect to negotiations because buyers now know that waiting will not only cost them more money, but they could also end up having to settle for a home that is less-desirable than the homes that have sold. No-one wants to buy a “left-over” home. This situation may be temporary as more homeowners thinking about selling are likely to decide to jump into the market, for fear of missing out on selling when most people are buying. These sellers will conclude that it is better to sell when everyone is buying, as opposed to taking a chance that something may happen to discourage buyers. After all, the last time that happened was in 2006, and it has taken over 6 years for the market to finally recover.
In a nutshell, the timing is ideal for people thinking about selling their homes. Buyers are motivated and competition from other existing listings is limited. It makes sense to take advantage of this window of opportunity before many more sellers jump back into the market.