Thursday, May 02, 2013

Still a Short Supply of Homes For Sale

   The supply of homes for sale in Essex County is still at extremely low levels, even though this is the time of year we typically see the inventory levels climb. Having a 5-6 month supply of homes up for sale is considered a "normal" market. Anything about that and we have a buyer's market, and below is a seller's market.
   In Essex County there is currently a 2.2 month supply of single family homes on the market, making it a strong Seller's market. The same holds true for condos (2.7 months and multifamily homes (2.1 months).

What that means for home owners is that this is the perfect time to sell. For more information, go to:


    The last few years were a rough time in the real estate market, especially if you wanted to sell your home. Over the last year things have been slowly getting better, with 2012 home prices in Salem increasing about 3.5% over 2011.  However, no one predicted the turnaround that happened during the late winter and spring of this year.
    Potential home buyers who have been waiting on the sidelines are finally realizing that prices are rising, and mortgage interest rates, although still at record lows, are bound to start rising. The number of homes on the market have been steadily decreasing during the last two years, to the point where it can be very difficult for a buyer to find exactly what they are looking for in a home. There have been numerous bidding wars on homes that were priced right and in a good location.
    What that means to the home owner who has been waiting to move is that now is the perfect time to sell your home. This spring we are seeing homes selling for more than 10% over what they would have sold for last year, and in half the time!
You may want to ask: "If prices are going up, why don't I just wait until next year and then I can get more money for my home, right?"
    There are a couple of things to think about if you want to "wait & see what happens". First, the market right now is very unusual. Low inventory combined with high demand equals higher prices. It's basic economics. But all it takes to change this "perfect storm" we are currently experiencing is for a lot more people to place their homes on the market. If the market gets flooded with homes for sale it can even drive prices down again.
Also, there is the misconception that if you wait a year or two until prices increase then you will have more money (home equity) to put down on a new home. Let's look at this situation - the difference between selling your home now and selling your home in a year if prices have gone up 10%.
2013 2014
Your Home's Sale Price $300,000 $330,000
Cost of Your New Home $400,000 $440,000
Difference $100,000 $110,000
    What you see in the above example is that your new home will actually cost you $10,000 if you wait for prices to go up. Yes, you will get more money for your home, but remember that the home you buy next year is also going to be higher in price. If you can buy your new home now and wait to sell your current home by renting it out to cover all your costs  (mortgage, taxes, insurance, water, sewer, etc.) then it might make sense. Otherwise, you are better off selling now while the market is hot.
    Mortgage interest rates will almost certainly rise by next year and add even more to your costs if you wait to sell. You could actually end up paying hundreds of dollars more each month for your new home next year than if you had purchased it this year at the current record low interest rates. Let's take the above example and see what our mortgage payment would be in each scenario based upon interest rates going up just 1% over the next year.
  2013 2014
Cost of Your New Home $400,000 $440,000
20% Down Payment $80,000 $88,000
Mortgage Amount $320,000 $352,000
Interest Rate 3.75% 4.75%
Monthly Mortgage Payment $1482 $1836

   As you can see you could be paying over $350 more per month for the same home in 2014 over 2013. Of course, all these examples are based upon speculation of what is going to be happening with the real estate and financial markets. Though we deal with both these markets on a daily basis, we do not claim to be able to predict whether they will go up or down, but can only give our best guess based upon all the stats available to us.

We would love to sit down with you and talk about whether it makes sense for you to sell your home now, or maybe wait awhile. We have been serving the North Shore community for a long time, and pride ourselves on the no obligation, no pressure information we provide. Contact Jim Armstrong - 978-394-6736 or fill out this contact form