Archive for the ‘Real Estate Market’ Category

Understanding How the Real Estate Market Affects Home Prices

Thursday, November 15th, 2007

Graph measuring home sales with interest ratesWhen interest rates go down do home prices go up?  When interest rates go up do home prices go down?Although interest rates seem to affect home prices there is another major factor that seem to affect the prices more.  That is supply.  Supply is the number of similar houses available at a given time that allows Buyers their choice.  This condition is called a “Buyers Market” and has a serious affect to home prices.  Sellers have a problem is having their listing stand out or separate their house from the pack.  Buyers have the ability to negotiate and play one seller against another.

Conditions: In a well established subdivision there are 40 houses of similar size, style and shape offered for sale. Ten of them are new houses listed by builders with their in-house agents. 
If you are a Buyers you should consider:

Researching the last six (6) months of actual sales and closings in the subdivision.

Determine what “Seller Concessions” such as payment of closing expenses, realtor bonuses, extra repairs or appliances upgrades were provided to the other Buyers.

Determine if there was any significant discrepancy in the lot sizes or location that would affect the value of the house. (Many times the builders will have Lot Premiums in their pricing)

Use these values to “adjust” any house you may be interested in.

Ask your Realtor to make an offer on the best resale house using these terms or adjustments and also to make an offer to at least one of the new houses using these terms as well.

You will find that the builders will be much more flexible and willing to make “adjustments”.

If you are a Seller you should consider:

Determine what houses are really comparable to your house.

Try to determine which houses that have sold in the subdivision over the last six (6) months are realistically comparable.

See what “adjustments” have been offered to the sold house

See which “adjustments” are being offered to the current listing houses.

Readjust you selling parameters accordingly.

Since there were only four homes closing per month over the last six months then there will be a ten (10) month inventory.  That means that more than likely your house will sit for 4-6 months unless you offer something to separate you from the pack.

 - Tim Leadbetter


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