- Monthly Q&A with Lane Hornung.
- Market no longer “frenzied and frustrating.”
- Buyers need a clear strategy.
How to describe today’s housing market?
During the Great Recession, which wasn’t that long ago in years, but was a different era as far as demand from buyer and sellers, it was clearly a strong buyer’s market.
Then, the endless supply of homes evaporated, the economy no longer looked as it would fall off a cliff and interest rates fell to never-seen-before lows.
Seemingly over night, it was a seller’s market.
It was what Lane Hornung, CEO and founder of 8z Real Estate, called the season of the two Fs — ‘frenzied and frustrating,” as bidding wars became common and consumers were forced to make buying decisions on the spot.
The monthly conversation between Lane and John Rebchook of InsideRealEstateNews.com is about where we are in the market at this point of time and what it means for buyers and sellers.
John: Lane, clearly the market is not as frenetic as it was a few months ago. Does that mean it is now the buyers who are in the catbird seat?
Lane: No, it is not a buyer’s market. The market has slowed, but not all that surprising. The market slows every Autumn as we head into Winter. The market is more active than typical at this time of year.
John: You seem pretty confident. What do you base it on?
Lane: If you aggregate the market across geographic areas, I think it is still a seller’s market. The reason I say that is because if you look at the inventory in most areas, there is still more demand for homes than there is a supply. The inventory has creeped up a little, but not that much.
John: So what does that mean?
Lane: Speaking generically, where we might have had a 1.8-month supply of homes, now we have a 2.5-month supply of homes.
When you are well under six months of inventory, that is clearly a seller’s market.
John: I suppose the same is true for interest rates.
Lane: That is right. You won’t find interest rates at 3.5 percent anymore, but at 4 or 4.5 percent they are incredibly low by any other historical period. We may never see rates as low as we did when they were at their absolute bottom.
Of course, any time rates go up, that means some people will no longer be able to buy a home, or will have to settle for a less expensive home.
John: But rising rates and more supply doesn’t mean a sea change in the market?
Lane: No. We saw a sea change in February and March of 2012, when we went from a buyer’s market to a seller’s market in about six weeks.
John: So if you are a prospective buyer in today’s market you shouldn’t be lulled into thinking that a seller will take a low-ball offer?
Lane: It’s important to understand that every listing is different, and every seller is different, so I’m not a big believer in blanket rules or buying strategies like offering 10 percent below list. What if the listing is overpriced by 25 percent? Ten percent below list isn’t all that great of a deal. That said, in this tight market, you have to have a mindset of making all of your decisions up front and be clear of what your operating parameters are. Then, you can act decisively when you get into the heat of battle and are placing offers. You have to think things through, or you are going to lose out on a home, or alternatively, pay more than you wanted to.
John: And if you are a seller?
Lane: Do not price your home too high. Home prices are rising on a year-over-year basis, but they are tapering.
Prices have been rising maybe 9 or 10 percent on a year-over-year basis in Denver and twice that in California.
Remember, if you see a year-over-year gain of 7 or 8 percent in this fall, that is on top of a 5 or 6 percent gain the prior year.
That’s a pretty healthy increase. And it’s usually even a larger gain when you look back three or four years. Remember, the market in most areas bottomed way back in the spring of 2009.
John: Thanks, Lane.
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.