Spring has almost sprung, meaning we are about to enter peak home buying season. According to Realtor.com, the greatest proportion of buyers tends to emerge between April and June. When demand grows, homeowners can sell their homes faster and at better prices, which typically makes spring a great time to sell.
Of course, the housing market is constantly changing, and it is important to consider the current conditions when deciding how and when to sell your home. If you are thinking about putting your home on the market in the coming months, you are certainly in luck. Experts are saying that this spring is going to be a seller's market.
Jonathon Smoke, chief economist for Realtor.com predicted back in January that the spring market of 2016 would favor the seller.
"The 2016 housing market is forecasted to be mainly a seller's market, filled with increasing home prices, relatively low inventory, and fierce competition between buyers," he said.
Now, as we experience some last-minute winter frost and head into spring, Smoke's prediction seems like it will come true. Here's why:
1. Supply is limited
Ralph McLaughlin, chief economist for Trulia, told HousingWire that the inventory of homes for sale has decreased 35 percent over the past four years.
The National Association of Realtors reported that while there is usually a six- to seven-month supply of homes on the market at any given time, right now there is only a four-month supply.
This limited supply is a great opportunity for sellers. When inventory is limited, sellers tend to face offers from multiple buyers and may find their homes at the center of some pretty extreme bidding wars.
This, of course, gives the seller the upper hand. He or she not only gets to pick the best offer of many, but he or she also has more leverage in negotiations. Both the buyer and seller know there are plenty of other eager buyers out there, so the buyer will probably be less rigid and the seller won't have to make as many compromises.
2. More people have jobs
NAR recently spoke with Smoke about the upcoming spring housing market. He told the publication that 151,000 jobs were created in January and that unemployment is almost at the lowest it has been in 10 years. More jobs means more spending power. A greater number of people are simply in a position to buy. According to Smoke, the growth in U.S. employment will cause home sales to increase 3 percent this year.
3. Millennials are growing up
According to NerdWallet, the slew of millennials entering the housing market is another reason 2016 will see a growth in demand. Millennials are the largest generation in U.S. history, so what they're doing matters. According to NAR's 2015 Home Buyer and Seller Generational Trends Report, millennials currently make up 32 percent of all homebuyers.
NerdWallet explained that the growth in millennial interest in homes will cause more single-family homes to be built, but the will not be built at a pace fast enough to accommodate the demand.
What sellers should do
So how should sellers prepare for this upcoming spring? First of all, it is important they don't get too cocky. It may be a seller's market, but it is still important to give the buyers all the reasons in the world to choose you.
1. Set the right price
It starts with providing a reasonable asking price that will get those buyers in the door. Realtor.com said it is vital to closely examine your local market when determining the price of your home. Sure, the national market can give you a general idea of what to expect, but the community in which your selling your home is all that really matters in the end. Sellers should study what similar homes in their area are selling for and price it based on those numbers.
Smoke emphasized the importance of getting the price right the first time. It is a bad strategy to test if the home will sell at a super high price and then decide to lower it later if it doesn't. The longer a home stays on the market, the harder it is to sell because buyers will be suspicious about why it hasn't sold. Getting it right the first time matters.
"Making the error of going for a price that's well above the market price is a recipe for being let down and potentially not selling the home at all," Smoke said on Realtor.com.
2. Consider a pre-listing inspection
Aside from comparison research, a pre-listing inspection is a great way to help a seller determine how to price his or her home. A pre-listing inspection is a home inspection paid for by the seller before the home goes on the market. It alerts the seller of any major and minor issues present in the home.
Once the seller receives the home inspector's report, he or she can decide whether to fix the issues or factor in the cost of repairs to the price of the home by lowering it accordingly. If the home inspector gives the home a clean bill of health, the seller can decide to ask for a higher price, explaining to buyers that they would not have to sink any other money into the home because it is in tip top shape.