What Goes into House Prices in a Competitive Market
You may be selling a home in a competitive market — for example, with low inventory and high demand. And you may be thinking “Yay!” or at least “Whew.” You know you’re likely to have more interested buyers, better offers, and a quicker trip to contract than you’d have otherwise. But along with that good news comes the need to manage your expectations by understanding what determines house prices and home sales. Factors include the right real estate agent, local market conditions, buyer preferences, seasonality, and mortgage rates versus inventory.
Work with the Right Real Estate Agent to Sell Your Home
House prices come down to the micro real estate market, says Jasen Edwards, a real estate coach. “What’s going on in the U.S. as a whole is different than what’s going on in Austin, Texas. [And both are] different than what’s going on in your neighborhood,” he says. “You might hear that it’s a strong seller’s market, but you might be in a micro buyer’s market."
Edwards advises researching your market on your own, then interviewing real estate professionals to find the best person to work with. Sellers should approach working with an agent as though they’re forming a team. You’ll be creating a plan together on how to maximize home pricing, Edwards says.
Consider Local Market Conditions that Affect House Prices
Sometimes home improvements are needed to maximize the price. When Bernadette Inez decided to put her southwest Chicago home on the market, she opted to do some updates to appeal to more buyers. The 1950s tile in one of her bathrooms was showing its age, so she hired a contractor to install a vinyl covering. She hired someone to reglaze the tub in her other bathroom and replace all faucets, including in the kitchen. She also repainted her living room.
Think about Buyer Preferences that May Affect Your Home Pricing
In addition to home condition, other factors, including buyer preferences, affect price. Being located on a busy street or alley, for instance, may deter some buyers. “I put myself in the buyers’ shoes [about] what they’re seeing in the home,” says Erika Villegas, managing broker and co-owner of RE/MAX In The Village in Oak Park, Ill. “For instance, many are homeschooling right now. That is influencing which features buyers want in a home.”
Know that Seasonality May Be a Factor
Seasonality has historically been a factor, but 2020 was an exception, when strong home sales extended into late fall and early winter. Existing-home sales in November were up almost 26%, and sales prices nearly 15% from the previous year, according to the National Association of REALTORS®. Transactions and house prices nationwide traditionally trend up in the summer, when home shopping activity is high. They slow in the winter, when demand wanes. Demand also correlates with Americans’ higher mobility rates in the summer, when school is out. However, seasonality is also regional, with markets in the Northeast and Midwest peaking more significantly in the summer than the South and West, NAR reports.
Why You May Need to Be Flexible
Flexibility is a plus, even when circumstances seem to favor sellers. Low inventory and aggressive house prices are compromising many buyers’ ability to afford a home. Sellers should be prepared to make adjustments if necessary. “No one has a crystal ball,” says Edwards. Ideally, the seller should list at a price that gets attention and triggers a lot of interest, he adds.