Homebuyers continue to be challenged by a lack of properties for sale and it appears likely that high buyer demand will continue to outpace the number of available homes. At the end of March, the National Association of Realtors reported just 1.07 million homes were listed for sale, a drop of 28.2% compared to the end of March 2020. If no new homes were listed and the current pace of sales continues, every home will be sold within 2.1 months compared to a 3.3-month supply in March 2020.
The shortage of homes for sale has been building for years and was exacerbated by the increased demand during the pandemic when buyers were looking for more space, a new location or both.
“We’re still selling more homes year-over-year, it’s just that homes that come on the market are selling fast,” says Larry “Boomer” Foster, president of Long & Foster Real Estate. “We need more new homes to be built and more homeowners who want to sell.”
There are multiple causes for the lack of homes for sale, but positive demographics are in place for more listings to come on the market in the next three to five years, says Gary Scott, also president of Long & Foster Real Estate.
“The ‘Silver Tsunami’ of retirees moving was postponed because empty nesters are aging in place rather than moving, but as time goes on, they’re more likely to be ready to sell and downsize into something with less maintenance,” says Scott. “The pandemic put a hold on those sales for many older people because they didn’t want anyone coming into their home, but as more people get vaccinated, we’re likely to see more homes come on the market.”
Baby boomers are healthier than previous generations, live longer and work longer, says Foster, which keeps them in their homes longer, too.
“A second problem is that builders can’t build homes quickly enough to meet buyer demand,” says Foster. “That keeps existing homes selling fast.”
Resolving Concerns for Wavering Would-Be Sellers
Many homeowners are happy where they are and have no intention of selling, points out Scott.
“Some homeowners just refinanced into a low mortgage rate and don’t want to give up that loan too quickly,” Scott says.
The biggest issue, though, is that homeowners are reticent to sell because they don’t know if they can find something to buy that they want and can afford, says Foster.
“When homeowners are concerned about where they will go if they sell their home, it’s important for them to manage their expectations about the possibility of needing an interim home while they find a home to buy,” says Scott. “Moving is inevitably an inconvenient process. The days of timing your sale and your move are over, so homeowners need to decide how they will manage their move.”
Since sellers have the upper hand in today’s market, they can often negotiate favorable terms that will make it simpler for them to move.
“Sellers can put a ‘choice of home’ contingency in the contract to give them time to find a home they want to buy before settlement,” says Foster. “Normally that’s 60 to 90 days, but if a buyer wants to buy your home badly enough, they could accept an even longer wait.”
Alternatively, sellers can also negotiate to rent back their home from the buyers after the settlement while they search for a home, typically for 30 to 60 days, says Foster.
“Some buyers are offering free rentbacks to sellers as an incentive to accept their offer, so sellers can live in their home without paying rent or a mortgage for a couple of months while they look for a place to buy,” Foster says.
An experienced professional listing agent can help sellers negotiate favorable terms and decide which options work best for their situation. An experienced agent can also provide market insight about options for buying their next home.
Buying Before Selling to Reduce Risk
In today’s market, in which sellers have the upper hand, it’s one of the least risky times to buy your next home before you sell your current home, says Scott.
“But you still have to declutter your home, stage it and price it a tiny bit below competing homes to generate multiple offers,” he says. “It’s smart to do a pre-sale home inspection and make your home the most desirable possible so that it sells quickly. Listen to what your listing agent recommends to position it for the market.”
A professional real estate agent can help you evaluate your options for buying and selling to decide which to do first and how to optimize both transactions.
If you’re thinking about selling your home this year, consult a Long & Foster Real Estate agent for local market expertise and knowledge of national trends. Long & Foster has multiple divisions to help you manage any real estate transaction and extensive resources for data analysis to inform your decisions. Long & Foster agents have marketing expertise and access to global affiliates such as Christie’s International Real Estate and Luxury Portfolio International to help you sell your property and find your next home. Your agent can help you find the contractors, moving companies and other professionals you need for a smooth move.