Adventures In Real Estate

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5 Signs of a Seller’s Market

The Mt. Shasta real estate market got an early start this year with buying activity beginning in January, and rising to a fever pitch by March. As we enter April, which is when sales activity normally begins to pick up after a quiet winter, we’re faced with a notable disparity between supply and demand, leading us into a Seller’s market. So, how can you tell which market you’re in?

Here are five ways to determine if it’s a Seller’s market

1) Low Inventory—Currently, there are only 88 single family homes for sale in Mt. Shasta (24), Dunsmuir (17), McCloud (6), Weed (9), and Lake Shastina (24) combined. When there is more Buyer demand than Seller inventory, the Sellers have the upper hand.

2) Multiple Offers—Our sleepy little hamlet of Mt. Shasta has been seeing shades of Bay-Area madness lately with even the most unlikely properties receiving multiple offers. And not just two offers coming in, but some new listings have prompted up to four—and in one case, even seven—offers! And when that many Buyers are willing to throw money at a single listing? You guessed it: Seller’s market.

3) Decreased DOM (Days On Market)—It’s a little embarrassing when you send a Buyer a new listing you think they’d like, only to have it already in escrow by the time they get back to you expressing interest. It’s been a little surprising how quickly new listings are moving this year compared to last year. Of course houses in the lower price points are the first to get snapped up, but even some of the median-priced houses are posting single-digit DOMs.

4) Low Market Absorption Rate—The absorption rate determines how many months it would take to sell ALL the active inventory at the current rate of sale. The rate of sale is the number of homes that went into escrow in the past 30 days. A quick search on the MLS for the cities listed above gives that number as 29. So, if we take our number 88 (active inventory) and divide it by 29 (rate of sale), we get 3.04 (absorption rate), which means it’ll take a little over 3 months to sell all our current inventory. The threshold to determine which type of market you’re in is roughly 6 months. A rate of sale LESS than 6 months signals a Seller’s market, and MORE than 6 means a Buyer’s market.

5) Rising Prices—The good old law of economics states that when demand outweighs supply, prices go up. Of course, we are just entering the 2017 spring selling season, so prices are already rising for that reason. Combined with high demand, low inventory, and a strong Bull market, today’s Sellers are pricing their homes more aggressively with confidence.

What Does a Seller’s Market Mean for Sellers?

Homeowners always want to get the most money possible out of the sale of their home, and a Seller’s market gives them a great opportunity to do so. Rather than jumping at the first offer, Sellers can be more patient. They can be more selective in choosing the offer with the best terms, and they can reply with strong counter-offers.

If a homeowner is considering putting her home on the market, she should do it at the first sign of a Seller’s market. Sellers who procrastinate will find themselves staring at the downside of the season before they know it, and they’ll be kicking themselves upon realizing how much money they may have left on the table.

What Does a Seller’s Market Mean for Buyers?

House shoppers need to have their affairs in order at the outset. They should already be pre-approved with a lender who has a proven record of successful deals in the local area. Listing agents will put more stock in a lender they know can perform than one they’ve never heard of or worked with.

Buyers should have their down payment and closing costs squared away. They should have done their research online to determine what area they want to live in, and what the home values in said area are so they can work within their budget. And, they should put strong offers together because they will be pitted against other Buyers who are interested in the same properties.

A broker in my office listed a house on Wednesday, and got a very weak offer on Monday. In a normal market, the Seller may have been willing to work with the offer. However, in this scenario, they are confident a better one will come along and are more than happy to wait for it. The moral? Buyers need to bring it fast and strong in order to get the attention—and the house—they are hoping to procure.

Image Copyright: sifotography via 123RF.com.

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mt shasta realtor nikolas allenNikolas Allen is a Realtor® with J. Harris & Associates Real Estate in Mt. Shasta, California. He helps people through the complex process of buying and selling their homes. For more real estate news and info, follow him on Twitter @nikolas_allen.

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