Aaron Farmer, a Realtor at Texas Discount Realty, saw last winter as a perfect time to list a property, with prices at an all-time high and bidding wars fetching offers far above asking prices. Little did he know what he was in for.
Farmer listed a south Austin condo at $359,900 for a client, and the bids poured in. The highest offer at $425,000 was 18% higher than the asking price. Just as Farmer was on the phone telling the second-highest bidder they lost, he learned that the first bidder had withdrawn the offer.
The first bidder likely “got cold feet and thought, ‘I’m overpaying,’” Farmer says. “I think my seller thought I was messing with him. He was a little upset because he saw $50,000 vanish.”
Although Farmer’s client still ended up selling above the asking price to the second-highest bidder, such whiplash is common as buyers compete to outbid each other for limited housing supply—and sellers scramble to secure the most promising bid. It may be the hottest seller’s market in memory, but even sellers have it tough in what Farmer calls an “instant roller coaster” of market ups and downs.
Navigating a Roller Coaster Housing Market
Real estate experts agree that the high-priced and incredibly tight housing market isn’t healthy for anyone. And it’s likely not sustainable either.
Total housing inventory hit a record low in December at just 910,100 units, down 14.2% from a year ago and the lowest amount in more than 20 years since the data was collected, according to the National Association of Realtors (NAR). The latest Zillow data shows housing inventory remains low, down 9.5% to 950,000 units in March compared to a year ago. This has pushed home prices to another monthly high of $375,300, a 15% jump from the same time last year.
The imbalanced housing market is also creating unrealistic expectations from buyers and sellers. For example, some sellers aren’t fully prepared for their home to fly off the market within days—or hours in some cases.
“Once their property goes on the market and they’re inundated with showings, it’s been amazingly stressful on” the seller, particularly “when they’re looking at 12 or 24 offers and trying to understand all the contingencies,” says Tiffany McQuaid, president of McQuaid & Company, a real estate services provider in Naples, Florida.
For some sellers who have not already secured a new place to live when their current home sells, it also means they have to immediately turn around and compete in a market over-saturated with buyers. In some cases, sellers might have only days or weeks to leave when they thought it might take months.
On the flip side, there are homeowners who bought in recent years and have enjoyed seeing their home equity increase in the double-digit percentages largely due to an unusual spike in home price appreciation. If these owners get ready to sell with the expectation that home prices will always appreciate 20% every year, they may be in for a rude awakening, housing experts say.
“There are a lot of people who paid way too much for their house in the past two years,” says Nicole Bachaud, a Zillow economist. She thinks it may be in for a reset soon, though not in the near future.
Instead, Bachaud expects the market will gradually return to a rational level—particularly as rising interest rates push some people out of the market.
Selling and Buying in Today’s Market
The current housing market can be intimidating for anyone. This includes potential sellers, who are sometimes so daunted at the thought of paying more to buy, rent or move multiple times that they stay put. While understandable from a cost-savings perspective, it’s also one of the reasons why supply is so limited now.
“Sellers are so afraid they won’t find something, so they won’t list,” says Amy Cesario, a real estate agent with Compass in Denver.
In response, Cesario is making good use of leaseback provisions in contracts. These allow sellers to stay in their homes for as long as possible once the sale is closed, giving them more time to make moving arrangements. However, 60 days—the longest that most lenders will allow—still sometimes isn’t enough.
And even when sellers have a plan, it can fall through. This was the case for Judith Mulholland, a retired publishing executive who worked with McQuaid’s firm to sell her house earlier this year as she prepared to move into a retirement community. However, the community she chose was under construction, which led to one delay after another.
Mulholland says having the right, experienced realtor made all the difference in getting her through the snags and eventually, into her new home.
“Having them [the Realtors] on the team made a lot of difference” to ease the stress of moving, she says.
5 Tips to Consider When Selling Your Home
- Think about why you want to move—and if you actually need to. “If it’s necessary for you to move, it’s a great time for you to put your house on the market,” says Sabrina Brown, a broker with Brown & Brown Real Estate in Fresno, California. If it’s not necessary, “you’re going to get a great return, but you’re going to lose [it] when you go to buy.”
- If you decide to sell, make sure to hire a reputable real estate agent. In such a tight market, good real estate agents prove their worth. “A real estate agent has to know contracts, inside and out, to negotiate on the seller’s behalf,” McQuaid says. “The higher-priced offer is not necessarily the best if the terms aren’t going to work in the best interest of the seller.”
- Be realistic with your expectations. While the market might be hypercompetitive, it’s important to maintain sensible expectations, and a good real estate agent can help with that. If you overprice your home, it could end up lingering on the market—and prospective buyers might wonder what’s wrong with it. “Don’t be greedy. You will get more if you aren’t greedy,” Cesario says.
- Consider if there are any easy steps you can take to fairly raise the asking price. This means “hiring an agent who will get [sellers] to do the right things,” Cesario says. For example, this could include deep-cleaning pet smells or hauling away clutter. “Why wouldn’t you try to get $10,000 more by spending $500? What you get in return is dramatic compared to what you spend,” she says.
- Remember that all markets generally revert to the mean. Bachaud says that as interest rates are likely to keep rising this year, it will price some people out of the market, easing pressure.