Right Time to Sell? Right Time to Buy?

Last month continued to show a strong trend in the local market but, even so, there was a noticeable slowing in sales. June was the 17th straight month with sales higher not only than the same month in the previous year but also higher than the same month in the previous 6 years. However, there was a noticeable drop from the 3 record months of March through May.

2 things that are likely causing this: 1) the low inventory is starting to have more of an effect and 2) an increase of interest rates. A few weeks ago there was a sudden 1/2 percent increase in interest rates and that not only had an effect on the residential market here, but I got a report that it had a similar effect on the commercial market in Los Angeles.

Even so, we are still seeing a high level of sales:

We are also starting to see a very slow and gradual increase in inventory although not nearly as much as we need to see. In a normal market there would be 5-6 months inventory and last month we got dangerously low, falling below 3 months, and this month just barely got back above the 3 month market. Until this start to get to a more normal range we won’t be able to continue at the kind of sales pace we saw in March, April and May.

Information for charts above was taken from PRO/Suncoast MLS from Jan 2007 thru May 2011 & from the MFRMLS for May 2011 thru June 2013. This information may or may not include all listed expired, withdrawn, pending or sold properties of one or more members of the My Florida Regional Multiple Listing Service.

So does all this mean it is a good time or a bad time for sellers and buyers?

For Sellers

A lot of people who had wanted to sell their home, condo or townhouse in the last few years had decided to wait, either because they were underwater on their loan and couldn’t sell or because they wanted to get a better price. I talk with people all the time who don’t realize that prices have gone up quite a bit in the last 12-18 months and may even be in a situation now where they are no longer underwater or actually have equity in their home.

Some potential sellers think that they should keep waiting for prices to go up more and that it isn’t a good time to sell yet. However, I heard the same thing last year from buyers who were waiting for prices to go down a little further and now are wishing they hadn’t waited.

Prices will continue to rise, especially as long as we are in a low inventory situation, but it is most likely that they won’t continue to rise at the pace we have been seeing. Some of the dramatic increase in prices over the last year are to some extent a recovery from prices having fallen too much since 2007-2008. In addition, part of the recovery was fueled by investors purchasing properties at very low prices and now that prices have risen they are seeing less profitability in purchasing and some are starting to get out of the market. This is good because then there will be more available for individual buyers but it will contribute to some slowing in sales.

There is also the factor of interest rates. As they start to rise, there will also be some slowing in the market and buyers will be looking at higher monthly payments. As that starts to happen, buyers will not be as willing to pay as much and that will definitely slow the price increases.

With the continued strong interest from buyers and the current low interest rates and less competition, this is definitely a good time to sell and the above factors explain why it won’t be a good idea to just wait for another year or so.

For Buyers

It has definitely been rougher for buyers lately – much less to choose from and sellers unwilling to negotiate much on their price.

However, we have now moved out of the very strong selling season and there is a mild slowing in the market and a mild increase in properties coming on the market.

Those sellers who want to sell and were unable to sell during the peak Spring season, especially if they were overpriced, will start to become more willing to negotiate on their price. Typically, price increases slow, level off, or even reverse a small amount during the summer months and sellers who did not price their property correctly and are still trying to sell will be in a situation where they will be more willing to reduce their price to a more reasonable range. This will not be true for all sellers and there still is a constrained inventory – but you will find that now is going to be a better time for buyers.

One disadvantage is that with the looming threat of increases in interest rates, there will be more buyers starting to act now, but this will only get worse as time goes on so it would be smarter to act sooner than later.

The Real Key

For buyers – the key to success is preparation and having the ability to act quickly.

For sellers – the key to success is accurate pricing and the correct marketing directed to the people who are buyers for your property and not going to broadly which brings lots of lookers and no real buyers. And having an agent who does their job correctly.