The word on the street–maybe even your street– is: “It’s a seller’s market.”
You hear it all the time these days from friends, family, business acquaintances, and anyone who claims to be in tune with the residential real estate market.
Real estate tracking firm CoreLogic data seems to confirm it’s been a seller’s market recently. It reported that Southern California home sales in March reached the highest number seen in 10 years.
But is it really a seller’s market? Or does the term apply only to specific price ranges, certain communities, and particular types of sellers? To find out, we interviewed two of our real estate agents who deal with those types of questions every day.
Joe Parker, a Santa Barbara native, knows the intricacies of the coastal community. He heads The Santa Barbara Group in our Santa Barbara office. John Armijo, with the Laguna Niguel office, has been successful in real estate sales since 1978.
It is a seller’s market for a select number of sellers out there, Joe believes.
“I don’t think you can label it across the board for a couple of reasons,” he said. “The low inventory of available homes is driving the competition among buyers to get properties. Less competition helps the seller be in a good position. The continued low interest rates have been fueling it, kind of like a herky-jerky type of influencer on the market.”
Rising interest rates have tended to slow down buying a bit, and possibly taken some of the leverage away from sellers, he said. Interest rates are fueling buyers’ confidence and motivating them for fear of paying a higher interest rate if they wait too long.
“And then, as the dust inevitably settles, after a small climb in rates, they tend to slide back down a little, and I think that has boosted buyers’ confidence. They’ve weathered a couple of upticks in interest rates for years now. And when they get used to the uptick, it’s not as much of a shock anymore.”
John, who has seen many cycles since he started in real estate, tends to concur.
“What I’m seeing now is the pretty basic laws of supply and demand are in place,” he said. “But especially in certain price points within Southern California, including Orange County, there’s just not enough inventory. It’s lower than it’s been in a long time. Interest rates are still low, so supply and demand are still pushing prices up.
“We’re seeing more activity in the lower price points, with multiple offers on homes for sale under $500,000, which is mostly condos and townhomes now. We have agents telling buyers before they put them in their car, ‘If you’re not ready to make an offer today if you see something you like, it probably won’t be available the next time we meet.’ It’s important working with buyers that you prepare them for what the market is like at their price point.”
So, let’s ask once again: Is it really a seller’s market?
“There’s only a select few who are really experiencing the benefits of a seller’s market, and it’s the sellers who are pricing their homes aggressively or at least properly,” Joe said. “We have a ton of sellers out there who are overpricing their property, but the buyers are extremely price-sensitive. They almost take it personally if a property is overpriced. They’ll straight out ignore it and not even want to visit it.
“So pricing is huge. If you price home right, and price it aggressively, I think you’ll experience that seller’s market trend that’s happening out there. Also, if it’s turnkey and designed really well, you can have your price maybe a little bit aggressive and still feel the seller’s market experience.
“Price it right, and price it aggressively”
“Because the trend I’ve been noticing is, buyers don’t want to do work after they close escrow. If a house has all the bells and whistles, and is designed and finished really nicely with quality and good taste, I still find that segment of the market is rather bullish and is pushing prices upward.
“But if they have a fixer-upper, something that needs to be overhauled or upgraded after the close of escrow, they have to be very careful and price it very sharply, if not aggressively, to move it. If they don’t, they’re probably going to have the worst experience of any seller on the market. An overpriced fixer is just going to be absolute crickets out there.”
John said the low- to mid-price range, $500,000 to $800,000, seems to be the most active market because it’s where some first-time homebuyers as well as first-time move-up buyers. As prices go up, over a $1 million, activity slows down, and days on the market is extended–over $1.3 million, even more so.
“Is this going to continue?” he said. “I think as long as interest rates stay low, and the economic market continues to show strength, we’re going to have people trying to get into this under-$800,000 Southern California market while they can–especially the entry- to mid-level price range.
“If you price it according to what the comparables are, you can expect offers. We see some sellers trying to push the price up a little too hard, and those stay on the market. If the property is priced right, it’s gone if it’s in fair to good condition.”
That’s our agents’ take on the situation now in Santa Barbara and Orange counties. To get a fix on whether your community is truly in the midst of a seller’s market, it’s always best to consult with an experienced real estate professional.