Housing inventory is rising, but the number of buyers is rising too
Right now, Portland is in the throes of a very hot sellers’ market. Houses are selling as fast as they are listed, usually at list price but I’ve seen houses sell for much more than list price. It is not at all uncommon to see multiple offers on a single house the day the listing goes live. Yes, you can find properties on the market that have been listed for months and months, but lately when a house sits on the market more than a few days, it is because of one of three variables:
- It IS over-priced and the seller won’t budge on the price.
- Location – homes located in or very near heavy commercial areas, high traffic areas, or areas that are not well maintained fall into this category.
- It is priced above investors’ “sweet spot.” The sweet spot is a price that allows “investors,” to purchase the home, renovate it, sometimes from the studs out for huge cash outlays, and resell it at or below a price of $550,000.
Investors are out in huge numbers again. These are not the flippers of the last selling frenzy in 2012-2013. These are investment firms looking for homes, often in the most desirable neighborhoods priced in that sweet spot that their teams can renovate and still make a huge profit on.
Home buyers are frustrated. Many find themselves making offers on 5-6 houses before they finally have an offer accepted. But in the meantime, prices continue to rise.
Advice to home buyers
- Be ready to look at any home that is listed as quickly as possible; same day listed is best, and be ready to write an offer immediately. (That’s what your competition is doing.)
- The only time you should be considering a low offer is when you like a house that has been on the market several weeks or longer.
- Expect multiple offers, and write the best offer you can initially. It is best to keep your offer “clean,” with as few contingencies as possible.
- Cash is not necessarily king in this type of market, especially since rules for pre-approvals have tightened and fewer home sales are failing due to financing. (Even asking for a property inspection is considered a contingency, though inspections are highly recommended.)
To make matters even harder for buyers, sellers are savvy to this market and are rarely viewing offers the day the home is listed. All too often sellers will hold off looking at offers for at least several days to see if a bidding war occurs. They want to see the price escalate, so of course, this is to their advantage.
Advice to home sellers
Potential home sellers are torn between getting in on the hot market and waiting to see how high prices might rise. But trying to time the market is a gamble. We have no idea how long this booming market for sellers will last (though forecasts are that we will see a booming market at least through the spring and early summer months). But for those who also want to purchase a home with the proceeds of their own home sale, one has to keep in mind that the house you want to purchase is also going up in price.
March is usually considered the most active month for home buyers, though in Portland, the buyers appeared in January, and most realtors don’t see any let up in sight.
On the sidelines?
We have finally recovered from the recession in most areas, seeing at least a 25% increase in values since 2012 in almost every neighborhood in the Portland metro area. This year, lower priced homes are rising in value faster than higher priced homes. The forecast is that homes priced at $300,000 and up will see approximately an 8.3% increase in values in 2015, while homes priced under $300,000 will see value increases of 11% or more. In either event, this is a good year to get into the housing market, especially as mortgage rates remain low and really have no where to go but up.