By Chad Taylor
As the market shifts from a seller’s market to a more balanced market, there are certain homeowners who are affected first. Two of the most common groups are:
- Homes on a busy street or external block
- Homes with functional obsolescence or that are outdated
Before we discuss how the market will change for the aforementioned homeowners, first we must understand how buyers are impacted by a strong seller’s market, like the one that we have experienced for the last six years. When there is a shortage of housing inventory, buyers cannot be picky. In some cases, they are just happy to actually get a home. Especially when bidding wars are prevalent in their price range or location.
In a seller’s market, a buyer’s wish list for their future home must be contained to their “must haves” and their “like to haves”, in many cases, have to be pushed aside. On top of that, the must have list cannot be a long one- that is if the buyer ever wants to actually purchase a home. Buyers with a long must have list in a seller’s market will more than likely find themselves looking at a lot of houses, but never actually purchasing one.
As we edge closer and closer to a balanced real estate market, buyers will soon have the option to extend their must have list. And they may even get to add a few like to have’s. This occurs because a balanced market has more housing inventory available. When buyers have options, they also reserve the right to be picky.
This brings us to our original point concerning our two groups. So lets look at them one at a time:
- Busy street/external block. When buyers are presented with the option of buying a home on a quiet (internal block) street or on a busier (external block) street, buyers will almost always choose the quieter street. Rarely do buyers say, ” Lets make an offer on that house that had lots of street noise. You know, the one with lots of traffic day and night.” Because the common choice for buyers is an internal block home, in order for external block homes to sell in a balanced market they must offer either more space and updates for the same price as the competition on an internal block OR the same home for a lower price due to the busy street. This can pose an equity problem for homeowners who purchased during the recent seller’s market and will now be selling in a more balanced market. They may find that they have to price much more competitively than their competition on internal block streets in the same neighborhood.
- Functional obsolescence/outdated homes. Again, when buyers are presented with the option of buying a home that has been updated versus a home that has not, the most recent buyer pool most often will choose an updated home. Over the last six years, sellers have been able to get away with doing fewer conditional improvements to their home and have still been able to sell. As the market balances out, it will become once again a “price war AND a beauty contest”. The overall condition of a home is becoming more and more important as we proceed into the summer months. As with homes on a busy street, a seller can either choose to improve their home to make it more marketable or they can price accordingly. A word of caution- when pricing to offset condition, oftentimes a seller has to consider not only the cost of the project but also a dollar amount to offset the inconvenience to the buyer for taking on the project.
If you or someone you know is planning to sell a home on a busier street or a home with some conditional challenges, please contact us today to discuss your options and to create a plan to ensure that you sell in short order and for the best price possible.
