Welcome to 2022, and another year of the housing market favoring sellers over buyers.
As we learned last year, the housing market is short by as much as 6.5 million homes, according to the National Association of Realtors. Redfin reports that buyers are facing the fewest number of listings on record, as the number of active listings fell 27% from a year ago. One example: Pre-pandemic, one community on Chicago’s North Shore had 130 homes for sale. Today, there are fewer than 15. According to Redfin Chief Economist Daryl Fairweather, the number of homes for sale in Austin, Texas, is also extremely constrained.
It’s Economy 101: Too many qualified buyers chasing too few homes mean home prices will continue to rise as long as interest rates don’t get too high. If they do, the housing market will finally slow down and become more balanced.
Will that happen this year? According to the Federal Reserve Bank, it’s likely. Especially since the recently released minutes from their December meeting show they are rethinking when to start raising interest rates to help curb elevated inflation levels. Some economists think the Federal Reserve could pull the trigger and raise interest rates in March, with more raises to come.
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But even if home price appreciation moderates, home sellers have done extremely well since the first quarter of 2009, during the Great Recession. According to the Federal Reserve Bank of St. Louis, the average price of a home sold in the first quarter of 2009 was $257,000. In the third quarter of 2021, the average price of a home sold was $453,300, a 76% increase in 12 years, a little over 6% per year. That’s far above the rate of inflation during the same time period.
Sellers selling in 2022 should, in most communities, be able to sell with relative ease during the first half of the year. It may be a little tougher as we move toward 2023, depending on how fast interest rates rise.
If you’re selling this year, keep these New Year’s resolution in mind for an easier, speedier sale:
1. Price your home correctly. If the last few years have proven anything, it’s that buyers will pay almost anything to get a home. Bidding wars were common. They may be less so in your community, so pay attention to the numbers your agent brings to the table.
Pricing your home competitively may generate a number of offers in excess of the list price. What you want is to generate interest and showings, and a “pie in the sky” price won’t do that, even with the dearth of homes for sale.
2. Make your home stand out online. There may not be a crowd of homes for sale, but you want yours noticed for all the right reasons. Anyone looking in your neighborhood will see that your home is for sale. But they’re probably pretty seasoned buyers at this point, and they’ll quickly be able to tell if your home is a possibility.
So, do what you can to make your home look as clean and polished as possible: Strip your home of all personal effects and artwork, clear out half the furniture (or all, in some cases), repaint the walls white, buff the floors, and put up neutral bed coverings. Give your home a deep cleaning, re-grout dirty tiles, and replace carpet as needed. Replace old fixtures with modern LED lights. Open the window shades (or remove them) and clean the windows.
Charming exteriors will get noticed faster, and if prospective sellers do a drive-by showing, your home must dazzle them into stopping to take a closer look. To that end, repair anything that’s broken. Repaint where needed. Be sure to shovel the driveway and walkways so prospective buyers don’t have trouble coming up to the front door. Once spring comes, plant colorful flowers and edge your lawn. Decide if your front door and walkway could use sprucing up with a coat of paint or a more complete refresh.
3. Decide in advance what is the minimum acceptable sales price, and then stick to it. One of the biggest mistakes sellers make is letting greed get the best of them. Either they set the list price too high, and then have to go through painful rounds of list price reductions, or, once an offer comes in, they fight tooth and nail for every last dollar instead of negotiating to get the deal done.
The best thing you can do is decide what is the minimum price you’d be willing to accept. Write that number down and when the first offer rolls in, look at that piece of paper and see how it compares to the offer. If you’re at or above your minimum acceptable price, you’re in good shape. Everything else is gravy. And, if you get your minimum acceptable price, we think you should relax and feel good about the deal.
We believe that the best real estate deals happen when everyone walks away happy. As a seller in 2022, resolve to move on from your home, grateful for the time you’ve spent there and the buyer who will care for your home going forward.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)