We’re at the stage where everything sounds like good news for housing – after being pummeled for years with bad news, it is a welcome relief for the casual observer. But it is mostly feel-good emotions, without much detail on how it will play out.
A snippet from the Bloomberg story today on existing home sales:
“This isn’t worrisome at all,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected a drop to a 4.95 million annual rate. “For the first time in a while, it looks like it’s a sellers’ market as much as it’s a buyers’ market. I suspect prices and sales will go up again in 2013.
But without foreclosures or short-sales to rely on for inventory, we are dependent on the elective seller. When they catch a soundbite like that one, it empowers them to wait until prices rise further, or list now and shoot for the moon.
The new listings of NSDCC detached-homes between January 1-17:
|Year||#New Listings||LP Avg. $/sf|
The inventory keeps dropping, while sellers’ expectations keep rising. Something has to give, and it’s likely to be the buyers’ willingness to keep chasing these prices – at this rate, we’ll be above peak pricing before too long.
Who will keep the buyers in check?
- Appraisers don’t get paid enough to over-inflate values. They will bring in a higher price if it is within reason, but they aren’t going to do any favors.
- Mortgage underwriters are still conservative, and have the right to whack an appraiser’s value if they think it is out-of-line.
- Friends and family are going to tell them they are crazy paying that much.
The smart sellers are those that list for a reasonable price about 1% to 5% above comps – they will look like a deal, compared to the rest, and the resulting bidding war should run it up further!