You’ve heard it all before. The pandemic upended everything, including residential real estate. It seemed like everyone needed more space. For those who could work from home, it meant buying without thinking about commute times or access to transit and was spurred by low interest rates. While that happened here in Seattle, it also played out across the country.
Nationally, Zillow reported available home inventory across the U.S. was at its lowest in 40 years in February. We’re seeing that echoed here as well. There were 8 percent fewer sales in the first quarter of 2022 than in 2021. That’s not because the market is slow — it’s not; there simply aren’t enough houses available to buy. That low inventory is causing high housing prices, bidding wars and conditions on sales we’ve never seen before.
To give you some idea of what this means, area real estate analysts say that even with a flood of available houses on the market, it would take about two years to get to a neutral market. A neutral market is when you have four to six months of inventory. The unfortunate reality is that we just don’t see that flood as a possibility, at least this year.
Nothing is normal
We thought we’d start to get to a “new normal” as pandemic restrictions wind down, people return to work and everyone adjusts. That’s not happening. We’ll see more inventory come on the market in April, like any normal spring, but it simply won’t be enough.
What we’re seeing has no precedent. It’s gone beyond what we call a seller’s market. This is a win-or-lose market. With so few homes selling, comps — the settlement price of comparable homes in the area — effectively don’t exist. Every home sold sets a new price benchmark for sellers and their brokers.
This market has put sellers and their brokers in the drivers’ seats. While buyers have been waiving contingencies to win houses for years now, sellers are now setting new conditions. My team has eight homes set to hit the market in April where the terms of sale include being able to stay in the home for up to six months after settlement. Buyers who want to win will accept that condition.
Finding the edge
While it’s true that — at this moment — sellers have the power, there are limits. Don’t get greedy if you’re putting your home on the market. In a recent transaction, the sellers were unrealistic about the process and just how much power they really had. The last several comparable sales escalated from $2.5 to $2.8 million. The sellers flat out listed at the amount the home would likely escalate to, and yet they still expected multiple bids and a much higher price.
After I obtained intel from the listing broker that she was expecting three to four offers, my buyer clients put together an offer $50,000 below asking, waiving all contingencies, allowing the seller to stay for a period of time after closing, and we included an escalation clause in case multiple bids did in fact come in. There was only their offer in total, yet the seller came back demanding the price the buyers said they would pay up to in the escalation clause.
The buyers wouldn’t do it. Frankly, they didn't have to. Sellers can demand anything up to the point the market says “no.” In this case, the market was one set of buyers, and my clients wouldn’t give in.
Gaining your edge
In a win-or-lose market, everyone is looking for an edge. For sellers, it’s a high price and staying in the house while they find a place to land. While sellers have the advantage, it’s not the time to think you can just stick a sign in your lawn and you’re good. You still need expert advice and a broker who will go above and beyond to make a deal happen you’re happy with. That means a savvy, scrappy and experienced negotiator. It’s also one who’s honest enough to tell you that you still need to spruce up your home and grounds, clean and declutter. And has the contacts to outsource all those chores quickly if you’re too busy.
Buyers need thick skins, emotional resilience and all their financials tied up neatly. Buyers need a broker with great industry relationships and experience to help them win. One who knows that sometimes winning simply isn’t losing — and that means setting up buyers for success. Sometimes that success is advising buyers not to enter a bidding war they can’t win, or to not get so competitive they accept outrageous prices and demands from a seller they will regret later.
My team is one of the top real estate teams in the state. We have been successful in this market because we’re willing to be flexible and do the work that others won’t to get those wins for our clients. If you have any questions about whether you should sell, buy or just what’s happening, I’d love to hear from you. As a reminder, my home, my office and my team are focused here in Madison Park. If you’d like to set a time to talk through any matters involving real estate, my door is always open.
Madison Park Resident
Managing Broker Coldwell Banker Bain | Global Luxury